European Commerical Real Estate attracted a record €86.8 billion of investment in Q4 2016; 5% higher than the previous record set in Q4 2015.
The total for 2016 was €251.1 billion, down 10% on 2015.
The largest investment market in Q4 was Germany with a record €19.8 billion transacted.
Of Europes top markets, the Netherlands saw the largest year-on-year growth with investment in 2016 up 17% on 2015, meanwhile the UK saw the largest contraction with 2016 investment down 37% on the previous year.
Our latest annual debt review provides comprehensive analysis of 2015’s trends and considers how and why 2016 may be different.
Our key conclusions are:
Last year, new lending doubled, rising to €127 billion based on a record €273 billion of CRE investment.
Lending margins were generally stable for bilateral lending and LTV levels stayed low, by historic standards.
Despite the rise in new debt issuance, the total value of European CRE debt in 2015 was only slightly higher than in the previous year, at €1.1 trillion, because new lending was offset by the retirement of existing debt.
NPL activity was robust. Sales were up 23% in 2015 to €85 billion.
Dry powder for loans and distressed assets is high and pressure is rising on European banks which have yet to address long-standing, non-core loan books, meaning the pace of deleveraging will continue.
Investors have become more cautious. This change in sentiment is a factor in a slowdown in 2016 investment activity and is likely to affect loan pricing.
This year’s guide is the largest and most comprehensive yet with 64 EMEA cities featured including certain global hubs such as Hong Kong, New York City and Mexico City. Throughout the guide we demonstrate how traditional office settings compare to the more wide spread application of agile working environments.
The technology sector has been one of the strongest drivers of European office markets over recent years. In this report, we invite commercial real estate investors and technology companies to explore our insights into the location and character of tech hubs across Europe; to enhance understanding of the fundamental characteristics of tech clusters; and to identify future opportunities among highperforming, and emerging, tech cities.
•Millennials still enjoy physical retail, primarily as a social activity but also for the instant gratification it provides
•Retailers are investing in experiential factors to differentiate their offering from e-retail
•E-commerce sales are growing, but millennials use online services to research purchases, increasingly making them savvy and more powerful consumers
•E-commerce is seeing the greatest growth within Europe
•Despite attempts by retailers, millennials much prefer to have their deliveries sent to the home. This increasingly looks less viable due to the growing expectations and costs associated with this delivery option
•Logistical providers are having to trade off between the economies of scale associated with more rural large warehouses and speed of delivery within city hubs
Expect a year of political uncertainty and the challenge of rising interest rates in Europe in 2017
Politics aside, however, the gradual tightening of some occupier markets seen in 2016 will continue in 2017, especially for better properties in the better locations
Despite a gradual turnaround in the long-term interest rate trend, there is still scope for further yield compression in prime assets as rental growth and low interest rates by historical standards continues to make property look attractive
2018 or 2019, rather than 2017 are likely to be the years when the yield cycle starts to turn
From a real estate perspective, global gateway cities offer many benefits. Their attractiveness to people and businesses means that space demand in their commercial real estate markets increases steadily over the long term, underpinning rent growth. These cities are also highly liquid markets, where real estate investments can be readily bought and sold. We have compiled this new report so that those looking to invest in one or more of the world’s great cities can quickly and easily understand pricing and market conditions.
One perception openly held in the market is that the Nordic Region is set for significant growth with new demand, new build and new market entrants. It is believed that local and international investment, across the region will be significant as lower power costs, abundant resources of green energy, connectivity, taxation incentives, and natural cooling efficiencies present a formidable array of benefits for users.
The following is an executive review of the discussion that occurred during a breakfast hosted by CBRE on the subject of the data hosting landscape, market dynamics and demand spread across the hyper scale cloud, wholesale and retail colocation markets.
• E-commerce growth, changing consumer requirements, and a rise in automated technology are restructuring supply chains and changing the logistics landscape in Europe
• Making maximum use of a site is critical with strong pressure to store and handle as many units as possible whilst being in close proximity to core markets
• Not only can operations save on cost of land, they can also benefit from a cut in labour and transportation cost if they build vertically as opposed to outwards, or searching for cheaper space further afield
• CBRE has identified two main categories of vertical solutions likely to dominate the European logistics sector; high-bay structures and multi-level warehouses
• The uniformity of the goods handled in an operation is identified as the main factor in deciding on one of these vertical solutions
•There seems to be an ongoing discussion about the current pricing, the influx of foreign capital into the Danish property market and the contraction of the Danish prime yields over the last 24 months’ period.
•The performance of the Danish property market is strong, with the total 2016 investment volume expected to reach some DKK 60 billion, 25% above the 2015-level.
•Copenhagen prime office and retail yields stand at 4.10% and 3.30% respectively as at Q3 2016, the lowest levels in the last twenty years.
•Commercial Real Estate investment in Europe totalled €51.6 billion in Q3 2016, down €15.1 billion; 23% on Q3 2015.
•Germany accounted for 29% of all European investment this quarter, overtaking the UK as Europe’s largest market.
•Aside from the UK market, investment in Europe is moving at a similar pace to last year. Over the last four quarters; investment in Europe excluding the UK equalled that of the previous four quarters.
•Outside of the UK; investment in industrial ticked up 13% in the last four quarters compared to the previous four.
The European Hotel Investment MarketView highlights the key trends pan-Europe in terms of hotel transaction volumes and yields. This particular issue includes an in-depth review of the Spanish market given the high level of investor interest.
European hotel transaction volume year-to-date continues to reflect a testing 2016, down -34% year-on-year on 2015
Q3 2016 was profoundly more positive than the opening half of the year, down only -6% year-on-year on a strong third quarter of 2015
Germany valiantly remains the keystone and front-runner for European hotel liquidity in 2016
The greatest year-on-year country growth in hotel transaction volumes for Q3 was recorded for Spain (+162%)
EUR 7.2 billion invested in the Nordic region during Q3 2016.
14% is the Nordic share in the total European investment volume.
Residential sector dominated representing 33% of the total volume.
Prime rents stable with growth seen only in Sweden.
Prime yields dominantly stable or contracting.
Better Never Rests
Based in Helsinki, CBRE Finland Oy focuses on providing superior services in the commercial real estate markets throughout Finland. Our professionals specialize in the sale, acquisition, leasing and valuation of offices, retail units, shopping centres, and industrial and logistics parks.
CBRE Finland Oy provides the full spectrum of property consultancy services - including investment, agency and general advice to a wide range of clients, such as national and international companies and institutional and private investors.