Levels of investment in European commercial property in the first quarter were 4.4 per cent up on the same period in 2012 according to Cushman & Wakefield. The increased activity is supported by greater equity in the market and a willingness to take on higher levels of debt.
The core markets, including France, increased their market share
Unsurprisingly demand is highest in the core markets with the UK, Germany and France leading the way. In these markets volumes rose by 32 per cent, increasing their market share from 57 per cent to 64 per cent.
The Nordic countries, which performed very well last year, had a quieter opening to 2013 due to diminishing supplies and higher prices. Denmark, on the other hand, had a good first quarter as did Russia, the Czech Republic, Hungary, Luxembourg and the Netherlands. Even troubled Greece saw increased investment though, naturally, this was from a very low starting point.
A sector by sector breakdown reveals that the market for industrial property was particularly active with volumes up by 77 per cent year on year. Demand in the industrial sector was strongest in Central Europe, France, Germany and the Netherlands.
Retail demand was also good but in this sector investors were very selective. Shopping centres are seen as a safe bet and there were increased sales in the UK, France and Russia.
Unexpectedly perhaps, offices had a disappointing start to 2013, outside of the core markets. Volumes dropped by 4.8 per cent and market share was down to 43 per cent from 49 per cent. A shortage of quality stock was blamed for this fall.
David Hutchings, head of European research at Cushman & Wakefield, said that investors remain cautious about the state of the economy but are likely to show interest in both mature and emerging markets as the year progresses. ‘Prime property with long leases is looking particularly attractive,’ he added.
It will be interesting to see what the rest of the year will bring. Banks reportedly struggled with commercial property lending this quarter, but hopefully as investor get involved we’ll see a real lift in the commercial property market.