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Commercial property investment down in France and UK in first quarter of 2017

Property Markets / Outlook

England

May 31 2017

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PropertyWire

Investment in commercial property investment in the UK fell in the first quarter of 2017, probably due to Brexit concerns, but France also recorded a substantial fall, the latest analysis report shows.

Overall European commercial property investment volumes eased to €44.2 billion in the first three months of the year, a fall of 8.3% compared to the first quarter of 2016 but this followed a strong end to 2016, according to the research from international real estate firm Knight Frank.

On a year on year basis, investment activity was down in the first quarter in France by 33.2% and in the UK by 22.1%. The slowdown in France reflected investor caution in the run-up to the presidential election, while UK investment activity continued to be influenced by uncertainty around Brexit.

But the report pointed out that the overall decrease in UK volumes belied an upturn in the London office sector, driven by overseas buyers from Hong Kong, China and Germany.

In contrast to France and the UK, the German investment market maintained the strong momentum which saw it overtake the UK as Europe’s most active market in recent quarters with investment volumes up by 27.3% year on year in the first quarter of 2017.

A strong start to the year was also seen in Spain, with the report indicating that an improving economy and rental growth prospects fuelling international investor demand. Madrid even overtook Paris to be the second most active European city investment market in the first three months of the year, behind only London.

The report says that regardless of the decrease in overall European investment volumes in the first quarter, investor demand for European real estate remains strong and it continues to drive yield compression.

‘Germany consolidated its position as Europe’s most active investment market in the first quarter with transaction volumes exceeding the UK for the third successive quarter. The country’s current popularity as a safe haven market will have been bolstered by recent economic surveys, which are consistent with acceleration in German GDP growth,’ said Lee Elliott, partner head of commercial research at Knight Frank.

According to Chris Bell, managing director for Europe at Knight Frank, although overall European investment volumes were down in the first quarter, market evidence suggests that this is more a result of lack of supply than investor demand, borne out by the large volumes of capital remain targeted at real estate.

‘This point is further underscored with the strong competition for prime assets continuing to support historically low yields across most of the continent. The outlook for the rest of 2017 has been boosted by recent election results in France and the Netherlands, which have calmed investors’ fears of a lurch towards politicians with disruptive populist agendas,’ he said.

SOURCE: PropertyWire

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