A lot of the European investment market had to endure a slow summer as buyers and sellers worried about sovereign debt, austerity plans, double dips, inflation and anything else that hit the headlines! However while investment in the third quarter fell back – by 13% on Q2 – the final few months of the year have the potential to reverse that and more besides!
European Commercial Property Investment
Based on the deals being agreed now and those getting underway, we’re expecting volumes for the final quarter to possibly even hit €40bn, compared to just €23.8bn in the third quarter. That would be the strongest quarter since early 2008 and would push annual volumes back over €100bn – and whilst that may be just 40% of the markets peak of 2006/7 and only back in line with 2004 levels, given the mood of the market just a few months ago, it would still be a great result!
It could also put a lot of momentum behind the start of 2011 – no one wants to get left behind in a rising market after all! The demand is definitely there at the secure income end of the market to fuel a more notable revival and if bond yields stay as low as they are, secure prime assets should see more competition and further yield compression.
The banks may help by getting more competitive on lending terms, but with most looking to cut the overall size of their loan books and a substantial volume of refinancing drawing closer, they are more likely to be influential in boosting investment supply by forcing sales and restructurings, rather than in encouraging extra demand.
So that means we may have a more active market – but with no significant increase in leverage it would still fall some way short of the heady days of 2006/7, unfortunately!
David Hutchings, European Research Group, London