The Curious Shape of Investment Activity in Europe, by CBRE
"Commercial real estate activity in Europe finished the year on a high," writes Michael Haddock, senior director, EMEA research and Consulting, CBRE Econometrics in the January 21 issue of the firm’s "About Real Estate" newsletter. "The €53.4 billion of investment deals closed in the final quarter of 2013 represented a 46 percent increase on the previous quarter and was 19 percent higher than volume in the same quarter of 2012."
"Rather oddly, however," it continues, "the strongest growth in investment activity is coming at the two extremes of the market.” Investment in low-risk assets in core markets, particularly in central London and major German cities, is booming. So is investment in Europe’s high-risk markets. Those “that were rather dismissively labelled ‘PIIGS’ (Portugal, Ireland, Italy, Greece and Spain) at the height of the euro crisis are currently seeing the fastest growth in CRE investment transactions.” Most active investors in these markets are “leveraged opportunity funds prepared to take on high-risk investments to achieve high target IRRs [internal rates of return]."
European markets thus are seeing strong demand at both ends of the risk spectrum, with much slower growth in investment turnover elsewhere. Some countries, such as France, even experienced a year-on-year decline in investment between 2012 and 2013.
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