European commercial real estate investment hits €105b in 2010

LONDON: The European commercial real estate investment reached a surprising €35.8 billion (RM147.87 billion) in 4Q 2010, bringing the annual investment total to €105 billion, according to CB Richard Ellis's (CBRE) latest European Investment Quarterly.

This is by far the highest quarterly result since 1Q 2008, and amounted to 44% increase on the €73 billion in 2009.

However, despite the strong showing,  growth in activity remained focused at the core end of the market, with little demand for riskier, secondary investment, said CBRE.

With the UK, having been the first market to recover in this cycle, appearing to reach a plateau, investors are shifting their interest towards those Western European countries where economic and occupier fundamentals are the strongest.

According to CBRE, Germany, France and Sweden have benefited most, together accounting for more than €15 billion of transactions in the final quarter of 2010, twice as much as their combined total in 3Q 2010.

These markets, together with the UK, accounted for 75% of the European total in 4Q 2010, the highest since 3Q 2006.

The heightened level of activity in 4Q 2010 was influenced by improved liquidity and a steady flow of larger lot size transactions. Among the largest deals were the €1 billion plus Stratford City Shopping Centre in the UK, the €475 million sales of Klara Zenit in Sweden and the Opernturm office deal in Germany.

However, it was the aggressive bidding for core assets that had a more profound affect, driving prices and overall activity up in that segment of the market, said CBRE.

The shortage of good quality assets coupled with growing demand has prompted some investors to up the risk, albeit only slightly and focus is still on the core markets.

CBRE projected that based on the current economic climate and constrained lending market, it is difficult to see a significant shift along the risk spectrum in the near term.
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