The European commercial real estate market saw further polarisation in the third quarter of 2012 as investors continue to focus on stronger economies and prime property, according to a new report published yesterday (Tuesday 05 December).
However, the substantial price differential between prime and non-prime property is creating opportunities elsewhere in the region for value add investors, says the document from real estate consultants and analysts CBRE Group.
Commercial real estate investment in Europe totalled €28.3 billion in the quarter, a 14% increase on the level recorded in the second quarter of the year and almost exactly on a par with turnover in the third quarter of 2011.
Investment turnover has shown a strong seasonal effect over the last three years, with the final quarter significantly higher than the rest of the year and CBRE expects this to be repeated in 2012.
Investors continue to follow risk averse strategies favouring stronger economies, non-euro markets and prime property. Analysis of yields shows that pricing has proven robust at the prime end of the market despite the current economic backdrop. This highlights the fierce competition among investors for core assets, the report points out.
The strongest growth in investment turnover was seen in the UK, which accounted for approximately 42% of investment in Europe during the third quarter, outshining its recent quarterly average of 35%.
France and Germany also posted robust investment totals with investors attracted to the historically stable performance of the investment and occupational markets of key cities. The southern European economies fared less well and in Central and Eastern Europe (CEE), only in the relatively robust economy of Russia has the investment market remained strong.
The report also says that market activity in the retail sector continued to fall in the third quarter of 2012, both in absolute terms and as a proportion of the market as a whole. However, prime retail assets, which have been aggressively sought following the economic downturn because of their perceived defensive qualities, have become increasingly scarce and this has reduced investment activity in the retail sector from the elevated levels seen in 2010 and the first half of 2011.