Global capital crosses borders in quest for European assets


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.