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AT A GLANCE - MAIN INVESTMENT MARKETS IN WESTERN EUROPE - 28/07/16

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Transaction volumes staying above long-term average

The Eurozone’s laborious economic recovery has once again been hit by a political shock. The UK referendum’s direct effects on economic activity will be limited but not negligible, leading BNP Paribas economists to revise their forecasts slightly downward to 1.4% in the Eurozone in 2016. In the long term, the economic consequences will depend enormously on the type of agreement that the British will manage to negotiate with EU members. Given that the UK admits that it is not yet ready to start negotiations, it is really too soon to formulate any conclusions.

The volume of investment in commercial real estate amounted to € 34.7 bn during H1 2016. This represented a drop of 14% compared to H1 2015 which stays the highest first half-year period since 2007. Investment volumes may have slowed down over the last six months but they remained 30% above the 10-year average that stands at € 26.9bn.

Central London remains 11% up on long term average (€ 10.7bn) but suffered an 18% drop during H1 2016 compared to H1 2015 caused by a wait-and-see attitude regarding the EU-referendum; this drop could strengthen until there is some clarity on the future relationship between the UK and the EU.

Central Paris, after a very slow start to the year, caught up during Q2 and stood 8% down on H1 2015. In Germany, the 4 main markets recorded a 25% drop between H1 2016 and H1 2015; only Hamburg stayed on an upward trend and reached € 2.1bn over the first six months of 2016. Nevertheless, these 6 major European markets remained significantly above their 10-year average.

Dublin, thanks to an extraordinary catching-up in Q2 favoured by investor interest in retail assets, signed a new record at €2.3bn during H1 2016, almost doubling last year’s equivalent figure. Likewise, Brussels and Vienna have got off to a flying start in 2016.

Key interest rates posted new records in 2016. German 10-year bund already turned negative in Q2 (-0.13%) and should reach -0.2% at the end of the year. This, combined with high volume of liquidity tightened prime yields further. For offices, prime yields stood at 4.15 % in Q2 2016 on average among the 14 markets monitored 41 bp down on Q2 2015.

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AAG INVEST Q2 2016_VE
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