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Sharp increase in European property transactions recorded in H1 of 2006

€89.7 billion was transacted in the European property market in the H1 of 2006 in Europe according to the latest figures released by the world’s leading real estate advisor, CB Richard Ellis, indicating the strong investment trend continues across Europe.

This reflects a 42% increase on the same period last year and a 7% increase on the H2 of 2005. Almost half of the transactions recorded were cross border. Overall, cross-border investment increased to €42.9 billion, which is 49% of the total value. As in 2005, cross-border activity was dominated by US, UK, Irish and German investors. The number of large deals has increased and 58% of deals were over €100 million. This compares with 51% in 2005 and 47% in 2004, reflecting the continuing increase in the number of large portfolios that have been sold in Europe.

As expected, much of the investment activity has been focused on offices with €43.2 billion turnover. Retail proved to be weaker that in 2005, largely due to lower investment activity in UK shopping centers. Total shopping center transactions accounted for only €7.5 billion. In the industrial sector, investment turnover remained robust at €5.4 billion. The strong demand for property has had a direct impact on yields, which have continued to fall this year. The steepest falls were again recorded in CEE.

Prime yields have fallen in all sectors for the thirteenth successive quarter and now stand at 5.08%. Low interest rates have been a key driver of the rapid fall, however interest rates are now on the increase. Michael Haddock, EMEA Research Director for CB Richard Ellis said: “The first six months of 2006 have exceeded expectations and the strong demand for property has had a direct impact on yields which have continued to fall this year.

One of the key trends we’ve seen has been the appetite for investment outside of the usual sectors – office, retail and industrial – to include mixed-use property and hotels. The investment market in hotels has been particularly active, reaching €4 billion in the H1 of the year. “In terms of who’s buying and selling, property companies were again very active, both as purchasers and sellers.

Other collective vehicles continued to increase in importance as sellers, largely due to the German Open-Ended funds, which for the first time have proved to be overall net sellers outside Germany. German open-ended funds disposed of €7.3 billion in total. This was principally in Central London (€2.3 billion), Paris (€2.0 billion) and across Germany (€2.1 billion).