Germany surpassed the UK as Europe’s most active market for investment in commercial real estate in the first half of 2017, according to a report by property services firm Colliers International.
The report, Capital Flows: Developing not Cooling was released to coincide with the EXPO Real 2017 trade fair, currently being held in Munich.
Germany led the charge in H1 in terms of investment volumes, with €33 billion invested, a 33 percent year-on-year increase. This figure was boosted by the 2016 sale of the 15 million square foot Office First Portfolio to Blackstone by IVG.
German cities, according to the report, filled six of the top 12 destinations for capital invested in Europe. “The ‘distribution diversity’ this presents, alongside the ongoing economic and regulatory strength of the economy, should help drive another successful close to the year and offers a strong outlook for 2018,” said Richard Divall, head of EMEA cross border capital markets at Colliers International.
The UK, which placed second on the list, recorded volumes of €29.5 billion, which was €1.5 billion higher than in H2 2016 but around 12 percent lower than the €33.8 billion it recorded in H1 2016. The report found that the UK fought back against Germany in Q3 and predicted that H2 investment volumes will be a “photo finish” between the two markets.
“Bearing in mind how the depreciation of sterling to the euro has impacted UK investment volumes relative to euro-denominated markets like Germany, the lack of clarity over the future path of Brexit is clearly not deterring investors,” added Damian Harrington, the firm’s head of EMEA research.
Harrington said the sparsity of portfolio sales in the UK, of which the largest was the €850 million Aviva Airport deal, also held the market back. However, he added, the five major portfolios which have closed to date in Q3 will add a further €3 billion to UK firms’ coffers, including the recently announced Oaktree/Patrizia office portfolio.
The other major market of H1 2017 turned out to be Spain, posting volumes of €8.54 billion for the first six months of the year, putting it marginally ahead of France. This represented a 50 percent year-on-year growth in volumes and reflected a strong rebound for the country on the back of a significant uplift in export-driven economic growth.
The Merlin hotel portfolio acquisition by Foncière des Murs for over €550 million was one of the key Spanish deals of the year, Colliers said. However, the impact of the recent Catalonian referendum remains to be seen.