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SPECIAL REPORT

Cross-border investors drive Europe property market

Dubai, March 3, 2013

European commercial real estate investment turnover reached 44.8 billion euros ($58.3 billion) in the fourth quarter (Q4) of 2012, an increase of 53 per cent on Q3 2012 and 25 per cent on Q4 2011, according to real estate services firm CBRE.

The increase in investment activity was largely driven by a significant rise in cross-border investment.

Cross-border investors accounted for 46 per cent of the total in Q4 2012, up from 36 per cent in Q3 2012 (and 38 per cent in Q4 2011). This increase also goes a long way towards explaining the growth in average transaction size in Q4 2012.

The average transaction volume for investors buying in their own market stood at €21 million, increasing to €56 million for cross-border European investors and 89 million euros for non-European buyers.

US buyers were the most active cross-border investors accounting for 23 per cent of international investment in the second half of 2012.  The purchase by US private equity firm Lone Star of over 1 billion euros of assets in eastern Germany was the most notable deal of the quarter.

This was due not only to its size but the relatively opportunistic nature of the buyer and the diversity of the assets acquired. The transaction also suggests that international investor interest may have begun to return to the secondary market.

German investors were the second most significant cross-border buyer in the second half of 2012 but, unlike American investors, German money remained focused on prime property and in key European cities. Paris and Central London accounted for 50 per cent of German cross-border investment.

Norway made up the top three cross-border investors this quarter following strong activity by the Norwegian government pension fund (NBIM), which was involved in several of the largest deals recorded in 2012, including the purchase of a 50 per cent interest in the Meadowhall shopping centre in the UK and the sale and leaseback of Credit Suisse’s headquarters in Zurich, Switzerland.

London continued to lead the way as the largest and most liquid investment market in Europe accounting for 21 per cent of activity in the European markets in 2012.  International investment activity in London registered a sharp year-on-year increase of 59 per cent in 2012 rising to 13.4 billion euros compared to 8.4 billion euros  in 2011, with substantial investment coming from Asia and the Americas.

The French market benefited from institutional funds seeking prime office and retail space in Paris and Lyon and increased activity from Middle Eastern sovereign wealth funds. With the exception of the capital from the Middle East, cross-border investment into Paris came largely from Europe, in contrast to London.

Four of the ten largest transactions recorded in Europe in H2 2012 occurred in Germany, and 26 deals were valued at over 100 million euros. Berlin, Munich, Frankfurt and Hamburg were among the top ten most active cities for investment in 2012. In contrast to London and Paris, more than half (59 per cent) of investment in these cities was made via domestic investors. Similarly, investment in Stockholm, Oslo and Copenhagen was largely domestic.

Jonathan Hull, managing director, EMEA Capital Markets, CBRE, said: "We expect to see continued inflows of capital from diverse global locations during 2013.  Key players from Asia and the US will continue to seek opportunities across major continental European markets.”

“Whilst London has been the major beneficiary of inward capital flows to date, we believe a number of other European cities will be seen as more attractive during the course of the year.  However, differing risk profiles of investor groups will dictate their depth of interest in individual markets.

“While there is no imminent prospect of trading volumes returning to the levels of 2006 or 2007, Europe’s major markets are operating at a much improved level of liquidity and the gradually improving economic backdrop in some core markets is likely to facilitate greater cross-border investment in 2013,” he added. – TradeArabia News Service




Tags: Middle East | Germany | Norway | 2012 |

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