RCA: China and Hong Kong investors become net sellers in Europe in H1

German institutions continued to top the rankings of investors in European real estate in H1 and on a rolling 12-month basis their investments are at record levels, according to Real Capital Analytics, but one other group that is conspicuous in their absence from the Top 10 list are Chinese and Hong Kong-based investors.

Between 2013 and the end of 2017, these investors spent over €50 billion on European commercial property, but domestic capital restrictions mean buying has virtually ground to a halt. For the first time, they have become net sellers in European markets. Chinese and Hong Kong investors sold €3.2 billion in European assets in the first-half of 2019 versus acquisitions of just €1.0 billion.

The largest dispositions were in Germany but assets in London and France were also sold. In early Q3, Anbang sold the Hilton Doubletree in Amsterdam for €430 million.

German institutions continue their buying spree led by Allianz which spent €1.1 billion on assets in the UK, Milan, Madrid and Paris. Domestically, the largest German players have already purchased more apartment properties than they did in the whole of 2018. The gap in investment volumes thus far is in the office sector, where activity has dipped significantly.

Overall, cross-border capital accounted for 54% of all investment volumes in Q2’19 – the highest proportion since the start of 2016, according to Real Capital Analytics. The main reason is that domestic activity slowed in both the first and second quarters, whereas global investment volumes rebounded into the second quarter.

Domestic investment slowed significantly in the UK, down 32%, and in France, down 34%. In France, there has been an influx of overseas money, which is competing with the domestic players. In the UK, it appears that all capital sources are taking something of a pause while the Brexit saga plays itself out.

The three biggest players in the market all slowed their activity in H1’19. However, investment from U.S. institutions is still elevated and they remain by far the biggest source of overseas money. Unsurprisingly, Blackstone has been the biggest acquirer of European real estate this year, spending more than €4b so far. The largest single asset trade was a JV with German investor Quincap to purchase the Oberbaum City office complex in Berlin for €450m.

Real Capital Analytics’ H1 European investment trends analysis concludes tomorrow.

james.wallace@realassetmedia.com