In the 12 months to Q3 2019, real estate investment in Europe amounted to €291 billion – a 9% decline compared to the same period in 2018, CBRE data shows. Despite positive investor sentiment, lower investment activity is the result of a lack of quality product, amplified by fewer ultra-large transactions in the top 5 geographies, CBRE says.
In the UK, investors remain cautious due to Brexit uncertainty. In Germany, limited product availability and keen pricing are hampering further growth. Driven by a more domestic economy, France remains a flagship destination for foreign capital. In addition to France, volumes in the twelve months to 2019 Q3 increased in Ireland, Italy, and Sweden, mostly driven by larger transactions throughout various sectors, according to CBRE.
Q3 investment by sector:
- Offices: €28.4bn
- Residential: €15.8bn
- Retail: €9.2bn
- Industrial: €7.3bn
- Hotels: €4.7bn
- Other: €4.1bn
Turning to hotels, European real estate investment declined by 6.7% year-on-year in the 12-months to Q3 2019, totalling €23.3 billion for the period. Hotel investment accounted for 8.0% of all capital deployed in European real estate over the period.
The UK hotel deal volume was down 12.1% in the 12-months to Q3 2019, accounting for 27.0% of all investment in the European region. Germany regained its position as Europe’s second highest country in terms of the hotel investment volume, albeit down 18.2%.
Institutional buyers are reinforcing the shift of the Italian hotel investment market from opportunistic to core, says CBRE. In total, 15 separate deals in Q3 buoyed the French hotel investment volume. Hotel yields for the big five German cities decreased by 25bps across all operating structures in Q3, according to CBRE, adding:
“Pressure remains on German property yields given strong investor demand, a shortage of stock for sale and the low interest rate environment. Furthermore, the Vacant Possession yield for Dublin has decreased by 25bps in Q3 and Lisbon pricing continues to trend stronger.”