+33(0)173101995After a very marked recovery at the end of the year, the European corporate real estate market is evolving on a promising ridge line. Major trends, significant operations. Here is an market update for the first quarter of 2018.
In the first quarter of 2018, the total volume of corporate real estate investment over the last twelve months reached €264 billion at a European level. This represents an 11% increase over the first quarter of 2017.
"This is a good start to the year for the market, especially after a record year for investment in 2017," summarized BNP Paribas Real Estate in its latest study on corporate real estate in Europe in the first quarter of 2018.
Investments recorded during the quarter amounted to €51.3 billion. This result is slightly down from the previous year (-3% in comparison to the first quarter 2017), but activity remains dynamic due to several factors: a favourable economic environment, the availability of liquidity, the compression of prime yields and the fall in vacancy rates in major cities such as London, Paris and Berlin.
Office property is still in high demand
Among the most sought-after real estate assets in Europe, offices are still favoured by investors. In the first quarter of 2018, they accounted for 42% of the total investment volume over the last twelve months (or €112 billion), far ahead of retail property (22% of the total investment volume, or €58 billion) and the industrial and logistics sector (15%, or €39 billion).
During the quarter, investments fell by 6% in office and retail property by 3% in industry and logistics. However, this decline comes after an exceptional 2017.
European investors are back in force
Another striking result: European investors are the most represented in cross-border investments in the corporate property market. With a commitment of €10.7 billion, they accounted for 40% of the investment volume recorded in the first quarter of 2018. Cross-border investments remained at their highest level ever, reached in the fourth quarter of 2017.
European commercial property also continues to attract foreign investors. While their investment volume in the first quarter of 2018 was slightly lower than in the first quarter of 2017 (-4%), their share in committed investments rose from 48% to 52%. However, the withdrawal of investors from Asia and the Pacific must be highlighted, whose commitments to the European market fell by 22% in one year.
More than €20 billion in mega transactions in three months
Reaching over €100 million, mega transactions represented 33% of the transactions recorded in the first quarter of 2018. They amounted to €23 billion in Europe. Several emblematic office buildings changed ownership during this period, including the Springer Quartier in Hamburg, sold for €400 million, and the Cœur Marais in Paris, acquired by Generali for 377 million euros.
A dynamic supported essentially by the three largest European countries: from the first quarter of 2017 to the first quarter of 2018, the United Kingdom, Germany and France alone received €159 billion in investments, nearly 60% of the volume of commitments recorded in Europe.
UK and Germany in first position
Investments significantly increased in the United Kingdom in particular (+29% in volume from 2017 to 2018). In the first quarter of 2018, investors also committed more than €14 billion across the Channel. While these results are slightly lower than in the first quarter of 2017 (-3%), they remain 15% higher than the average recorded over the decade. London maintains its position as Europe's largest investment market.
In second position behind the United Kingdom, Germany received €12.3 billion of investments during the first quarter of 2018. As in the United Kingdom, however, these commitments are slightly lower than in the first quarter of 2017 (-3%). This year again, the three major markets of Hamburg, Frankfurt and Munich posted high results, 60% above the ten-year average.
This performance is the result of the significant increase in unique transactions on the market. However, Berlin was the exception, with commitments falling by 10% over the period, due to its preferential rates notably - the lowest on the European market (2.9%).
The French market continues to grow
In third place among the most attractive markets in Europe, the French corporate real estate market continues to grow. From the first quarter of 2017 to the first quarter of 2018, investments in commercial property increased by 9%, from €3.7 to €4 billion.
Office property, a preferred asset in France, recorded a 16% increase in commitments during the period. The retail segment grew by 6%, while investments in industry and logistics contracted by 21%.
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