Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.
LONDON-Direct investment in commercial real estate in Europe fell strongly in the first half to reach €24 billion, down 42% on H2 2008, but activity probably reached a floor, and is likely to revive in the second half, says Jones Lang LaSalle.
"We believe the European market has now reached a floor in transaction volumes and based upon investor interest we expect an increase in turnover in the second half," said Tony Horrell, JLL Head of European Capital Markets. Prime office yields were largely stable in Q2 2009 for the first time since mid-2007.
Volumes remained low because bid-offer spreads remains wide in some markets due to price expectations and needs of owners. "At the same time, falls in capital values have made pricing attractive for investors with equity or buyers who are not highly leveraged and have good banking relationships," he added
High net worth individuals and equity players are making the market as debt markets remain restricted. New lending is constrained and expensive, and most large deals have vendor financing or stapled debt. "There is no shortage of equity for income-secure opportunities," Horrell added. "We are seeing deep investor interest in London, with multiple bidding from international investors, some of whom benefit from currency advantage."
Nigel Roberts, JLL Head of European Research, said the UK remained the largest market in Europe, accounting for 35% or €8 billion of total volumes, while Germany accounted for €3.4 billion. France, Spain and Italy were marginally higher in Q2 2009 compared to the first, as attractive investment opportunities - often assets which rarely come to the market - appeared.
In a separate report, JLL said European cross-border investment rebounded in Q2 2009 and accounted for 52% of total direct volumes, up from 27% in Q1 2009. A strong 169% increase arose from investors outside Europe. In Q2 2009, France recorded the largest increase, almost doubling to €1.2 billion. Italy, Netherlands, Spain and Sweden also witnessed fairly strong growth, while Belgium and CEE saw lowered activity. German investors remained the largest net buyers in Europe with net purchases of €1.8 billion. Second largest group were investors sourcing capital globally, followed by Mid-East investors and Russians.
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