Global capital crosses borders in quest for European assets

CAPITAL FLOWS TO PROPERTY 2012

Real Capital Analytics reports uptick in European deals in second half of 2012, writes Alex Catalano

02.13 Fig 1 p12While European deal volumes were largely flat, at €134.4bn, in 2012 (see fig 1), they picked up in the second half, according to Real Capital Analytics’ Europe Capital Trends report.

Offices accounted for the bulk of 2012 European investment, at €57bn, although the volume was 7% down. Investment in retail fell 15%, to €32bn, but investment in the apartments sector leapt to €20bn, up 61% on 2011. Over half of this activity was in German multi-family housing, while investment in student housing more than doubled to €3bn.

Cross-border investment

Cross-border investors accounted for 46% of acquisitions, as domestic buyers pulled back, investing 12% less than last year.

02.13 Fig 2 p12Global capital was particularly active. Ten sovereign wealth funds and US investors acquired nearly €10bn in 2012 (see fig 2), led by top investor Norges Bank Investment Management, which spent €3bn. The State Oil Fund of Azerbaijan (SOFAZ) made its debut, investing €456m in 2012.

Continental cross-border investors mainly targeted the UK and Germany, reducing their activity in France.

Activity by country

The UK topped Europe’s investment league, with €41bn (see fig 3). German deals picked up in late 2012, with €11bn spent in Q4, the highest amount since 2007.

02.13 Fig 3 p12

Top 10 European city markets

London and Paris were Europe’s top city markets (see fig 4), but investment in London rose 14% in 2012, while in Paris, it fell 17%. German cities also featured, but Berlin was the only one to register an increase, of 15%. Investment in Moscow fell 22%, but the city had €3bn of deals pending at the start of 2013.

London property prices

RCA’s new repeat-sales based price index highlights the divergence between office prices in central London and the rest of the UK. West End prices are now 9% above their 2007 peak, but City prices are 21% below that.

02.13 Fig 4 p12

Distressed sales

European banks are taking a more aggressive line on bad loans. Distressed asset sales (excluding loan portfolios) accounted for 13% of all 2012 European deals, up from 8% in the previous two years.

Apartments accounted for the biggest share, thanks to sales of large German portfolios.

Ireland (not on the chart below) topped the league, with nearly 90% of sales involving distressed property (see January issue, pp17-19). The UK registered the next highest proportion, slightly above Germany, at 17% (see fig 5).

02.13 Fig 5 p12Peripheral markets – Spain, Italy, Portugal and Greece – came next, but their distressed sales are still well below Ireland’s.

 
SHARE