2017 RECORD YEAR FOR EUROPEAN REAL ESTATE INVESTMENT
- Total 2017 investment volumes up 9.3% on 2016
- Strong performance driven by upturn in UK investment volumes and a near record performance in Germany
- Record year for Industrial and Logistics investment as platform deals dominate the market
European commercial real estate investment volumes reached a record high of €286 billion in 2017, according to the latest data from leading global real estate advisor, CBRE. This represents an 9.3% increase on the previous year, when total investment volumes reached €261.5 billion.
An upturn in UK investment volumes, coupled with a near record performance in Germany, provided a significant boost to European volumes, contributing €72 billion and €57 billion respectively to the year-end total. UK investment volumes in 2017 were up 11.6% on 2016, driven by large volumes of international capital and several landmark deals; notably the sale of 20 Fenchurch Street (The Walkie Talkie) for £1.28 billion and the sale 122 Leadenhall Street (The Cheesegrater) for £1.15 billion. German investment volumes were up 8.4% on the previous year, boosted by a strong fourth quarter, which saw €17.8 billion of transactions bringing the annual investment turnover for Germany above the €50 billion mark for the fifth time since 2006.
Most European markets performed at elevated levels with several markets, including the Nordics, Austria, Italy, The Netherlands and CEE, posting record high investment volumes. €19.5 billion was invested into Dutch real estate over the course of 2017, representing a 42.7% increase on 2016 and surpassing the previous record of €13.7 billion. After a subdued start to the year, French investment volumes picked up in the final quarter of 2017, reaching €11.9 billion in Q4 and €26.8 billion for the year. Investor sentiment is positive in light of Macron’s election and recent economic reform.
Platform deals and corporate acquisitions dominated the market in 2017, with several high profile transactions completing during the course of the year. Of particular note were the €12.3 billion sale of the Logicor portfolio to China Investment Corporation and the €2.4 billion sale of IDI Gazeley to Global Logistics Properties. These deals illustrate the strong activity in M&A-type transactions in the Industrial and Logistics sector. As a result, investment activity in European Industrial and Logistics reached a record high of €42.5 billion in 2017, representing a 67% increase on 2016 and a 78.9% increase on 2015.
Other real estate sectors also out-performed previous years with hotels reaching a total volume of €21.8 billion, representing a 17.5% increase on 2016, and offices reaching a total investment volume of €114.5 billion, just ahead of the previous record in 2015 and 4.4% up on 2016.
2017 proved to be a record year for real estate investment driven largely by notable corporate platform transactions. There is certainly a scarcity of prime product across the major capital cities within Europe which has driven yields to record lows. Capital flows towards the real estate sector remain strong, as real estate has retained its competitive advantage against many other asset classes. Industrial and Logistics is now the fastest-growing sector in real estate across Europe, underlining the strong fundamentals of the sector.