European investment volumes hold up better than expected amid economic fallout from the pandemic
January 27, 2021
Commercial real estate investment volumes across Europe reached €275bn in 2020.
Even though this represents a 17% decrease from €331bn in 2019, this is a better performance than was initially anticipated in light of the Covid-19 pandemic. Meanwhile,according to data from the world’s largest commercial real estate services and investment firm, CBRE, the investment volume on the Hungarian market totalled €1bnin 2020.
Germany saw the highest level of investment in Europe with total investment volumes reaching €79.3bn, down just 5% on 2019, which saw record volumes.The Nordics also had a strong performance, with total investment volumes reaching €43.4bn, up 1% on the prior year. The UK was the second largest national investment market in Europe, with a total investment volume of €45.8bn, down 25% on the previous year and France was the third largest with volumes totaling €29bn, down 39% on 2019.
The Healthcare, Industrial and Multifamily sectors demonstrated resilience throughout the pandemic, with investment volumes up on 2019 by 13%, 7% and 6%, respectively. Retail investment was down 6% on 2019 as the pandemic has contributed to the rise of e-commerce, but the Hotel sector was undoubtedly the most affected, dropping by 66% versus 2019.
Q4 broke records
In Q4 2020, European investment volumes were €89.2bn, down 27% on Q4 2019, which was the strongest quarter ever recorded. Despite the general decline, the Nordics and the Netherlands achieved record-breaking quarterly investment activity of €16.2bn and €8.7bn, respectively. Q4 2020 was also the strongest quarter on record for the Multifamily sector across Europe, which saw €19.9bn of investment, whilst the Industrial sector saw €15.8bn of investment, the second highest quarterly volume on record.
Chris Brett, Managing Director, EMEA Capital Markets, CBRE commented: “Covid-19 was a black swan event that has had a significant impact on the real estate investment market. The ongoing immunization process is providing the market with some much-needed optimism, but the start of the year has been challenging with high infection rates across Europe. Structural drivers will continue to affect the market and as such we expect the strong appetite for Logistics and Multifamily assets to continue. We also expect to see strong demand for core Office properties that provide high quality amenities for occupiers, particularly around wellbeing and ESG, as well as the ongoing demand from Life Sciences assets. This could result in yields tightening for these types of asset as demand is strong and will increase further once travel restrictions are loosened. Core+ office space is expected to see further repricing and is likely to start offering great value for investors toward the middle of 2021. Following the agreement of a Brexit deal, we anticipate higher demand for UK assets than we saw in 2020 with deeper and more geographically diverse bidder pools emerging for best in class assets.”
After four years of historically high investment activity in Hungary with annual turnover volumes consistently exceeding EUR 1.5 billion, the COVID-19 pandemic and the resulting economic turbulence brought a dip last year. The 2020 investment volume totaled EUR 1.0 billion, showing a 40% correction year-on-year, reflecting a decrease both in the number of deals and the average ticket size. Nevertheless, the annual volume remained above the cyclical average since 2010. Last year also saw a rebalancing of capital sources.
“Interestingly, despite the travel ban and business restrictions, the share of foreign investors increased, and the share of domestic investors fell considerably from the preceding year’s record dominance. – added Gábor Borbély, Head of Research & Consultancy in Hungary. “The annual investment volume split equally between domestic and foreign purchasers, which was strongly driven by the local assets traded as part of two pan-European portfolios that were acquired by foreign investors.”
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