Q2 2018: Ongoing momentum for investment
The positive momentum continues in 2018 for commercial real estate investment in Europe. It advanced again during H1 2018 to €115.4bn, 2% above the H1 2017 result and the highest first half-year period since 2007. The 16 largest markets monitored within this report posted a 10% rise compared to H1 2017, reaching €43.3bn.
Global uncertainties are not deflecting investors who trust the positive economic environment and healthy occupier markets. This confidence benefited the office sector (+9% volume increase), bringing its share to 44% thanks to a prevalence of mega deals (>€100m). The retail investment volume stabilised around €25.8bn while industrial & logistics sector retreated (-16%).
Germany experienced the second-best H1 turnover of all time. This result is attributable to a record level of single deals rather than the portfolio deals that often boost the German result. Fewer portfolio sales, stemming from lack of product, resulted in a lower share of foreign investors who are the primary buyers of this segment. The four main German markets that contributed to this performance all saw a high number of mega deals (>€100m) with a new record for Munich and Berlin, and a second best result for Frankfurt and Hamburg. With €9.3bn invested in H1 2018, Central London remains the leading European market despite a 21% reduction versus 2017. The share of foreign investors (69%) shows the city’s enduring appeal abroad. The Parisian investment market experienced an exceptional first half (+66%) arising from a high level of mega deals inside Paris and in Western Crescent. Following London, Paris and the four main German markets comes Brussels (+126%) that jumps to 7th position. After a record year in 2017, Vienna’s investment market is surprisingly good despite the scarcity of attractive products, notably in the office segment. The investment volume in Madrid is low for a first half year (-40%) which is attributable to the slow market since the beginning of the year. Amsterdam (-32%) suffers a deficit of large deals with investment switching to other important office locations such as Rotterdam, Utrecht and The Hague. Dublin (+178%) posted eight deals over €100m which created a strong H1 2018, characterized by the presence of Asian investors. Despite a stronger Q2, the Milan market dropped overall compared to H1 2017 (-12%). Luxembourg follows a healthy trend (+68%) while CEE capitals Prague (-53%) and Warsaw (-6%) experienced a downturn. Lastly, the Lisbon market (+59%) experienced improvement driven by overseas investors.
After four years of yield compression throughout Europe, prime yields paused during the first half of 2018; a situation that could be maintained going forward. The pause means there were no changes in the ranking, with Berlin remaining the location with the lowest prime yield (2.90%), followed by Paris and Munich (3.00%).