Non-European buyers eye European investment markets

Cross-border investment accounts for 45% of the transaction volume in the European investment markets during Q1-Q3 2013, with a notable rise in the share of non-European investors entering the area, according to the latest pan-European research by Savills, which monitors markets in Belgium, France, Germany, Ireland, Italy, Netherlands, Poland, Spain, Sweden and the UK.

The international real estate advisor records a total European transaction volume of €80.6bn in this period, representing an increase of 13% year-on-year. Of this total €36.3bn is accounted for by international buyers of which €23bn was transacted by investors from outside of Europe. According to Savills report this represents an increase of non-European buyer share of Europe’s total investment volume to 29% in this period, up from 25% in 2012.

Investors from Middle and Far Eastern countries have increased activity levels in European markets accounting for a total €11.8bn of transactions so far in 2013, representing a 22% increase on the whole of 2012. These investors, including several new entries in 2013, tend to enter European markets with acquisitions in the UK where 74% of their investments are concentrated. The research shows that US investors are by far the most active cross border buyers in the region, accounting for €7.2bn of transactions in this period and have made acquisitions in all surveyed markets in 2013. The majority of US investment is recorded in the UK (49%) and Germany (16%).

Marcus Lemli, head of European investment at Savills, comments: “The rise of acquisitions by investors from outside Europe is important as this activity has kept investment volumes steady despite some weakening in cross-border investment within Europe. These European investors are generally focused on the core markets.”

In terms of volume the firm finds that the majority (67%) of overseas investment is transacted in the UK and Germany. Furthermore, Savills notes that the share of cross-border investment in individual markets varies considerably across the region with the highest levels recorded in Poland and Italy, where international money makes up approximately 85% and 89% of total investment, and is lowest in Sweden (approximately 8%).

Julia Maurer of Savills European research says: “Whilst the majority of overseas investment continues to be focused on core European markets, peripheral countries including Italy and Spain are benefitting from rising interest from more opportunistic buyers. These investors are looking for high quality assets at higher yields than they could achieve in core markets.”

In terms of yields, downward pressure on prime CBD office yields has continued for the fifth consecutive quarter according to the firm’s research, driven by increased demand in Dublin, Amsterdam and the top German cities. The average prime CBD office yield currently stands at 4.9%. The report records that prime shopping centre yields have moved in to 5.6% on average, primarily driven by downward pressure in Dublin.