Q4 2018: another stunning year for investment
The total commercial real estate investment volume in Europe reached €264.5bn in 2018, which is comparable to record year 2017 result (-1%). However, the sixteen consolidated markets monitored within this report showed more resilience as they broke the €100bn bar, an absolute record. This represented a 10% increase in average.
Office deals continued to be the backbone of activity, sustained by the record levels of office take-up. With €119bn invested (+4%), offices represented 45% of the activity in Europe, characterised by an important share of mega deals. Retail investment volumes dropped by 16% whilst logistics investment experienced a slight decline after an exceptional year 2017.
Paris (+26%) is back to being the leading European market. This performance was mainly driven by office mega deals and American investment. London (-10%) downgrades to second position but has concentrated the top three single deals of Europe. Foreign investors remain the majority buyers in London although some, notably the Chinese, have pulled back reducing overall share. Once again, German markets outperformed. 2018 was an all-time high for the country, passing 2007 result. Single deals led the market and reached a new record in terms of volumes while portfolios experienced a drop. Frankfurt (+36%) was number one in 2018, ahead of Berlin which was the only big German market to see a regression (-6%). With a stabilization, Madrid occupies the 7th place of the European cities ranking after a record year 2017. Amsterdam experienced a strong decline (-30%) despite a record level in the industrial and logistics sector like Madrid. In Milan, the strong result of industrial and logistics and hotels sectors did not counterbalance the regressions of retail and offices. 2018 was a good year for the Dublin market (+46%) that concentrated almost 90% of the Irish market. Office was by far the strongest performing asset. Brussels (+68%) owes its 2018 result to the retail sector that reached a record level thanks to the sale of two major shopping centres. Vienna experienced a 30% decline despite a strong performance in the retail sector. Despite an increased appetite from investors for Polish regional markets, office level was brought to a record in Warsaw, which led to a 135% progression for the investment market. The Luxembourg market reached its record level since 2007, with office representing 94% of the turnover. Finally the Prague market dropped (-46%) as the reduction of foreign investment was not balanced with the increase of domestic investment.
Property yields continued their downward trend throughout Europe to reach again historically low levels at the end of 2018. The most expensive markets are found in Germany: Berlin’s prime office yield reached 2.70%, followed by Munich (2.80%) and Frankfurt (2.95%). Paris comes after with a 3.00% prime office yield. Only London, Dublin and Madrid prime office yields remained stable compared to end of 2017.