Total European investment volume in the third quarter was down 5% year-on-year to €64.8 billion, compared with a 9% drop in the first half, RCA’s Europe Capital Trends Q3 2019 report shows. RCA’s figures compare with €69.5 billion for Q3 reported by CBRE, which also reported €291 billion in 12-month volumes to Q3.
Tom Leahy, RCA’s Senior Director of EMEA Analytics, explains:
“If the UK is excluded from the equation, then the European real estate investment market would have been in positive terrain for the third quarter and indeed year-to-date, with France a major contributing factor. The European Central Bank’s ongoing quantative easing policies are underpinning the attractiveness of real estate in the eyes of investors, particularly when many government and corporate bonds are offering negative yields.”
France was the outlier among the top European markets, with transaction volume up substantially in Q3 and 16% so far this year, to a certain extent offsetting weak performances in the UK and Germany. For the first time, Paris became Europe’s number one metropolitan market based on year-to-date activity.
The French market is dominated by Paris, which typically accounts for around 70% of annual investment volume, but deals in regional cities were also ahead of where they were this time last year. Lyon was the main driver, with €1.2 billion in transactions already recorded in 2019, putting the market on course for a record 12 months. The RCA Capital Liquidity Scores show Lyon is Europe’s best performer in the last two years, chalking up a 50% rise.
Investment in Paris is up 23% on the year, while London is down 32%. Although the total value of transactions is similar for both cities, the allocation of this capital between property sectors is not. The French capital’s office market accounts for 75% of the annual investment total, whereas in London the figure is closer to 65%. Brexit uncertainty is having the greatest impact on office transactions in London, with deals in the sector now representing the lowest ever proportion of the overall investment market.
Tom Leahy added:
“An increase in cross-border activity, particularly from South Korean investors, is largely driving the uptick in the Paris market. These investors have spread their geographic net in 2019, targeting a variety of markets across Western and Central Europe, including Warsaw and Prague.”
RCA’s Q3 European investment analysis concludes tomorrow.