The fall was not surprising given the flurry of activity in the fourth quarter as investors rushed to deploy capital before the end of the year, said Magali Marton, DTZ head of continental Europe and Middle East research. "This seasonal pattern has been a traditional feature in the European property investment markets. In fact, the average volume over the last four quarters rose by 10%, and underscores the gradual recovery in Europe's markets."

Around two-thirds of first quarter activity was accounted for by the big three markets of the UK, Germany and France, with Germany grabbing a bigger share as activity rose 40% from Q4 to $5.8 billion. In contrast, lower volumes in UK and France reflected both increased investor caution and a general lack of stock. Elsewhere in Europe, the Nordic countries were very dynamic, with an increase by 64% quarter-on-quarter in the first three 2010 months.

As occupier demand remains weak and uncertainties exist over the sustainability of the economic recovery, a number of investors are biding their time. "Despite much more optimism demonstrated by investors, risk aversion remains evident across Europe; with investors concentrating on domestic markets and particularly on prime assets in core markets," Marton added. "With a growing level of debt due for refinance in the next couple of years, we see opportunities for those investors with equity to acquire opportunities which to date have not been available in the market."