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At a Glance - Main Investment Markets in Europe - Q4 2017

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Q4 2017: new all-time record for the property investment market

The total commercial real estate investment volume in Europe reached €259bn in 2017, 11% above 2016 result. This is an all-time record year for the European market, exceeding 2015 precedent record of €252bn. This year the market benefited from a planets line up and seems to have reached its peak. However the 15 consolidated markets monitored within this report posted an 8% decrease compared to 2016, reaching €87.6bn.

The good upswing of the European economies and the performance of the occupier markets fostered the investment market dynamism. Most of the asset classes contributed to the market upturn. With 43% of the volume invested, offices remain the investors darling. This year was characterised by the sale of trophy assets such as Cœur Défense in Paris, the Walkie-talkie and the Cheese grater in London, also the Sony Center in Berlin. The greatest progress was achieved by the logistics sector (+56%) due to large corporate deals which led to an extraordinary high turnover for the sector, including Logicor for €12bn.

2017 performance was led by German markets. Almost half of the volumes were mega deals (>€100m), which is a record for the country. The strongest progression was observed in Berlin (+46%) that takes the first place of the German city ranking. Central London is back to the first place of the European city ranking in 2017 with €22.5bn (+26%). The concerns about the Brexit vote situation seem to have evaporated since foreign investors continued to dominate the market, accounting for more than 80% of the capital turnover. Central Paris is back to the second place, this regression (-18%) is mainly due to the lack of assets for sale. Despite their definite interest in the market, investors are struggling to find new assets and therefore hesitate to arbitrate. Amsterdam rises to the 4th place with a record turnover (+71%) duet to both large single transactions and portfolios. Then comes Madrid (-14%), showing investors continue to be attracted to the Spanish property market. Vienna (+100%) and Milan (+17%) position themselves as the 6th and 7th European markets, the first one showing a record level due to office large deals while Italy's first investment market saw a dramatic increase of the retail segment. Brussels (-9%) and Dublin (-52%) experienced market regressions this year.

The property yields continued their downward trend throughout Europe to reach again historically low levels at the end of 2017. Berlin prime office yield has fallen below the 3% mark, reaching 2.9%, stimulated by high demand and the expectations of ongoing growth. Munich (3%), Paris (3.05%) and Madrid (3.25%) follow. After a slight growth in 2016 during the Brexit vote, London prime office yield did not follow this upward trend but stabilised, confirming the temporary effect of the situation.

At a Glance - Main Investment Markets in Europe - Q4 2017
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