London attracted more commercial real estate investment last year than any other European city, according to a new survey. Investment in the capital rose every quarter in 2013 — with the fourth quarter up a staggering 73 per cent on the previous three months.
During the year as a whole London attracted 23 per cent of the European market, recording €32.2bn [£26bn] worth of transactions, an increase of 43 per cent on the previous year. The figures, compiled by international agents CBRE, mark the second consecutive year of strong investment activity after a 45 per cent rise between 2011 and 2012.
“London had a phenomenal year with the total value of investment reaching pre-global financial crisis levels,” commented Simon Barrowcliff, executive director for central London capital markets at CBRE.
“Looking forward to 2014, it is unlikely that the market will repeat this performance, although cross-border investor demand, particularly from Asia, is getting even stronger.” He warned that a shortage of prime office space in central London would limit investment activity.
Other areas of the UK also witnessed property investment growth throughout 2013, with transactions climbing steadily during the final five months of the year.
“The rest of Britain saw an impressive 75 per cent year-on-year increase in the total value of activity as investors searched for yield,” added Barrowcliff. “The improving UK economy is enhancing the prospects for commercial real estate and encouraging even cross-regional investors to venture outside London.”
Last year European commercial real estate investment deals reached €165.6bn [£137bn], increasing 30 per cent on the previous year. The fourth quarter total, almost €61bn [£50bn], was the highest three-month figure recorded in Europe since the fourth quarter of 2007, the CBRE report claims.
After London, the second highest city for Euro-investment was Paris, with more than €11bn [£9bn] of commercial property deals. It was a relatively flat year for the city, however, with total investment falling by eight per cent year-on-year. The inclusion of five German cities in the report’s top 10 only underscores the country’s continued strong performance.
The markets most adversely affected by the financial crisis — Ireland, Italy, Spain and Portugal — last year recorded a total investment of €11.8bn [£9.7bn], more than double the figure for 2012, and signalling the first year of investment growth since 2007. As a result of the recovery in all four countries, CBRE expects locations like Madrid will return to the top 10 European investment markets during 2014.
The company also sees an acceleration in the flow of Chinese capital into Europe this year. “This has been expected for some time, but increased dramatically in 2013 with €2.4bn [£1.9bn] in acquisitions over the year — more than double the previous 10 years combined,” explained Jonathan Hull, managing director of EMEA capital markets at CBRE. “The Chinese insurance companies and sovereign wealth funds have clearly increased allocations to foreign real estate and we expect this to be an important feature of 2014.”
