Commercial real estate investment in Europe advanced again during H1 2018 to reach €115.4bn, 2% above the same period in 2017.
Germany contributed greatly to this performance by exceeding the previous year’s result (+0.1%) and recording the second-best H1 turnover of all time (€26.1bn).
The United Kingdom (€30bn) remained the leading European market despite a -6% reduction versus H1 2017, while the French investment market experienced an exceptional first half (+48% vs 2017) with volumes of €12.5bn.
Most of other European countries experienced an upturn such as Ireland (+224%), Poland (+110%) or Belgium (+81%). Only Czech Republic (-57%), Italy (-35%) and Spain (-22%) saw reductions compared to 2017.
Larry Young, head of International Investment Group at BNP Paribas Real Estate, said: “2017 was the record year for investment volumes in Europe and 2018 began strongly, notably with some very large office deals. Global investors believe in the positive economic environment and the healthy occupier markets in Europe.”
This confidence benefited the office sector (+9%), reflected in a share of 44% of total investment volume at €50.5bn. Retail investment volume stabilized at €25.8bn, while industrial & logistics sector totalling €14bn, a 12% market share. Hotels saw €7bn of investment in H1, with other asset classes attracting €18.1bn.
BNP Paribas Real Estate research found that foreign investor presence in the investment market declined. With almost €57bn invested during H1 2018, foreign investment volume decreased by 5% versus H1 2017 and now represents a share of 49%.
After a year dominated by Asian activity, investment from this region slowed in H1 2018 (-24%). European cross border investors were also less active (-13%). Middle East and North American investors were more present in the market with 19% and 5% increases.
Occupier markets still rising
The dynamism of the European office letting market did not wane in Q2. Transactions amounted to 4.79m m² since January – a rise in take-up of 4% compared to H1 2017. The market in Central London rallied to finish 26% up vs H1 2017.
Deals for large units continued to drive the volumes in Central Paris, where they increased by 12% compared to the same period in 2017. Despite a very slight dip (- 2%) due to exceptional results in H1 2017, the attractiveness of the four main German cities remained unchanged while outstanding results in H1 were also observed in Lisbon, Warsaw and in Dublin.
Aymeric Le Roux, executive director of International Advisory & Alliances at BNP Paribas Real Estate said: “After reaching exceptional results in 2017, the office markets across Europe are still thriving in 2018. The appeal of grade A office to occupiers remains undisputed, pushing up the rents in most European cities.
“Demand is also more and more driven by co-working companies, which are progressively becoming major actors on the letting market in most European markets”.
Vacancy plunged across Europe with the share of empty offices dropping the most in Warsaw (-420 bps vs last year), Amsterdam (-290 bps), Lisbon (-240 bps), Prague and Milan (-220 bps). In the meantime, prime rental values remained steady or increased in most main European markets.
The most important changes over the last 12 months were in Berlin (+13%, €408/m²/year), Frankfurt (+12%, €516/m²/year), Madrid (+11%, €408/m²/year), Milan (+10%, €570/m²/year) and Lisbon (+8%, €246/m²/year).
Visit the BNP Paribas Real Estate website to read the full analysis
