Q1 2019: investment is slower in many markets
The total commercial real estate investment volume in Europe reached €43.4bn in Q1 2019, 21% below Q1 2018 result. This result is the lowest Q1 in five years, but still above the 10-year average. The 16 largest markets monitored within this report posted a 23% decrease compared to 2018, reaching €14.7bn.
The majority share of investment came from offices which increased (44%) despite a decrease in the absolute in volume quarter to quarter (- 14%). The retail segment experienced the strongest decrease (-43%) as investors are very cautious about this asset class. The industrial & Logistics investment volumes also followed a downward trend (-23%), but this remains a strong result considering the record level set by Q1 2018.
Following 2018 trends, investment in London continued to decrease (- 23%). Brexit uncertainties plus a lack of listings across the board, particularly in the >€100m segment contributed to lower volume. Central Paris (-30%) saw a decrease due to a lack of major transactions in the office and retail sectors, but the trend should change in the coming months. As expected, most of Germany's top locations experienced a strong decrease of 37% on average: -77% for Munich, -67% for Frankfurt, -61% for Hamburg. Berlin went against the trend by hitting a new all-time high (+78%) with the capital city showing again its attraction for domestic and international investors. The Brussels market (-60%) which represents almost half the volume invested in Belgium, experienced sharp decline. Madrid’s investment market result is above Q1 2018 (+14%) with the end-of-year prospects for the city very positive. A strong decrease occurred in Amsterdam (-32%) although major office deals should be closed in the coming months that will see the volume total increase again. Dublin’s investment market experienced a decline of 31% despite the sale of Charlemont Exchange for €145m. Vienna recorded a slight decrease (-9%), though the Q1 total is still significantly above the 5-year average. Milan’s investment market experienced its second-best start to the year in 10 years (+93%), a result mainly due to activity in the office sector. Lisbon’s market was stable (-3%) and dominated by office buildings located in the CBD. Investment in Prague more than doubled compared to Q1 2018, but the rest of the year should be calmer due to a lack of products. Luxembourg’s market declined (-69%) with activity exclusively comprised of office deals. Warsaw starts the year with a strong performance (+105%) mainly due to the office segment.
After reaching historically low levels in 2018, most property yields have stabilized with the only exception being Prague (4.50%). The most expensive markets are found in Germany: Berlin’s prime office yield remained at 2.70%, followed by Munich (2.80%) and Frankfurt (2.95%). Paris comes after with a 3.00% prime office yield. The highest prime office yield is found in Warsaw (4.75%).