In the second quarter of 2016, the commercial real estate stayed solid across Europe with a total of €54.0 billion, up 2.5 percent from the first quarter and 30.4 percent on the 10-year average, new reports reveal.
However, total performance was behind in comparison with the second quarter of 2015, where the office sector had the best Q2 with an 8.3 percent increase in the first three months of 2016. This was influenced by a particularly good performance in the Nordic areas.
The study from CBRE also shows that despite uncertainty in the UK which was as a result of the European Union referendum, perception stayed strong in other European markets and investment levels were unchanging year over year.
Investment volumes in France and Sweden, the third and fourth biggest markets in Europe, were particularly buoyant. The figures reveal that over the previous year, investments in these markets have risen 32 percent and 20 percent respectively. No doubt, the second quarter results in both Sweden and France were increased by resilient office sectors.
Ireland also had an extremely good performance, conducting a total record transaction of €2.3 billion of commercial property deals, in the second Q2 of 2016. A figure that’s over two times that of the same quarter of the previous year, even though the sale of Blanchardstown Centre for about €1 billion was completed in this quarter.
Poland was next, transacting €1.5 billion in the second quarter, more than three times the amount recorded in the same quarter last year.
However, Germany showed lower levels of investment in the second quarter, which is probably connected to an unavailability of stock in the main markets, which reduced the European total. Core property in Germany is still well thought-of as a cherished haven and perception stays strong.
The UK also didn’t perform as strongly as its central European counterparts following the Brexit results. However, strong fundamentals continue to reinforce the UK market. The recent decline of the Pound, coupled with the low interest rates, has piqued the interest of global foreign investors to the UK. The spread between bond earnings and property is the widest on record, and has kept the fundamentals of UK and the central European Real Estate desirable.
While investors may have responded cautiously to the Brexit vote, the market fundamentals continue to be strong and investors still have substantial capital to invest. The uncertainty means that a lot of investors will study and understand how the market develops before taking a decision, says Jonathan Hull, MD of Investment Properties EMEA at CBRE.
However, according to Mr. Hull, sentiment is already developing as the UK goes into a more stable political atmosphere, and there is evidence of the market’s positive response to the situation.
Miles Gibson, Head of UK research at CBRE, says the EU referendum was a major factor that affected the investment activity in the Q2. However, instability in the financial markets earlier in 2016 was also responsible for making investors more risk averse, he concluded.