UK leads third quarterly drop in European YOY deal volumes

European investment volumes fell for the third consecutive quarter year-on-year in Q3 2016 confirms Real Capital Analytics.

RCA’s latest Europe Capital Trends quarterly update shows that deals fell 38 percent year on year, to €46 billion in Q3, and that, “hurt by Brexit concerns, the UK fell behind German volume for the first time since 2012.”

The Q3 fall means that investment volumes across Europe have now fallen 29 percent in the nine months to 30 September 2016 compared to the same period in 2015.

However, RCA says the overall figures should be viewed in the context of the exceptionally strong year for investment in 2015. Furthermore, Q3 2015 was the strongest third quarter of activity RCA has recorded and the Q3 2016 level is still in line with the 10-year market average.

The UK was by far the weakest market. Q3 volume of €10 billion was down between 40 percent and 60 percent versus comparable periods in the previous three years.

In London, pricing went into reverse. “Falling investment volumes and increased risks to the market post-Brexit have led to a fall in transaction prices and an increase in yields,” the bulletin says.

“The RCA/PD CPPI for Central London offices in Q3’16 is showing an 8% fall in prices since Q1’16. With uncertainty now the watchword for the market there is the likelihood of more declines to come.”

UK volume for the nine months to 30 September was €40.1 billion which is 46 percent lower than the first nine months of 2015.

The two other core markets of Germany and France also saw Q3 falls in volume, though less than the UK, and the strongest growth was in other markets.

German deal volume was off 34 percent in Q3 to €13.6 billion and in France deals declined 49 percent to €4.7 billion. Over the nine-month period they are both down by a third.

Countries which saw increases in investment volume were the Netherlands, Finland, Sweden and Spain.

One notable trend was a sign that North American investors are pulling back: they invested 55 percent less versus Q3 2015.