Q1 2018: flying start to the year for investment
The total commercial real estate investment volume in Europe reached €51.3bn in Q1 2018, 3% below the Q1 2017 result. This is a flying start to the year for the market especially since 2017 posted Europe’s all-time record for real estate investment. The 15 largest city markets monitored within this report actually posted a 2% increase compared to 2017, reaching €18.3bn.
The majority sector, offices, posted a stable share of investment (41%) despite a slight decrease of the volume over the quarter (-6%). The retail segment experienced a good first quarter in many markets, particularly in Belgium, Spain, Italy and Poland. The latter saw the sale of two portfolios and a shopping centre that totalled €1.7bn. The industrial & logistics investment volumes went down (-6%), which may give a directional foretaste for the upcoming year considering the extraordinary 2017 turnover in this sector.
The year started very well for the four main German markets (+50% on average) except for Berlin (-10%). This performance was led by single deals unlike the trend for portfolios from previous years. Central London remains the biggest European investment market despite a 42% drop compared to Q1 2017. The reason for decrease is not a lack of demand, rather a lack of trophy assets for sale. Central Paris improved compared to 2017 (+12%), led by strong interest in office investment (+18%). Brussels (+245%) moved up to 5th place in the city ranking thanks to two transactions over €300m: the Woluwe shopping centre and two office buildings. The levels of investment in Madrid saw a reduction which must be put in perspective considering the very good Q1 2017. The retail sector dominated the Madrid market notably thanks to the sale of Parque Corredor shopping centre (€200m). Vienna’s investment market (+58%) experienced a record level for a first quarter, led by the office and retail sectors. Milan’s investment market dropped (-35%) compared to a very high 2017. Amsterdam saw investment volumes drop by 65% whilst Lisbon increased by 54% with retail accounting for 90% of the turnover. Warsaw (+3%) registered a record level for a first quarter, again created by the retail sector. Lastly, Luxembourg market (-6%) was dominated by deals below €40m.
After reaching historically low levels at the end of 2017, prime yields stabilised in Q1 2018, for most European markets. The exceptions that continued a downward trend are Paris, Brussels, Bucharest and Prague. Berlin’s prime office yield remains unchanged at under 3%, making Berlin the most expensive European city for offices. Second place is shared by Paris and Munich.