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European investment - clouds could unsettle recovery in volumes

Total direct real estate investment across Europe increased 11% in Q1 2010, continuing the growth in the market since its low point in early 2009, said global real estate advisor DTZ.

Total direct real estate investment across Europe was €21.4 billion in Q2 2010, an 11% increase on the €19.3 billion recorded in Q1 2010, continuing the growth in the market since its low point in early 2009, said global real estate advisor, DTZ.

Commenting on the figures, Magali Marton, Head of DTZ CEMEA Research said “the recovery in volumes across Europe remains uneven. Over the quarter, of Europe’s major markets, the UK posted a 29% increase in volumes to €7.9 billion, with France registering a 23% increase to €2.2 billion. In contrast volumes in Germany slipped 19% to €3.8 billion.” 

Private property vehicles, including third party fund managers remained the dominant buyers over the quarter, with purchases totaling €10.1 billion. Institutional investors were increasingly active with €2.9 billion of purchases, while listed property companies accounted for a further €2.5 billion of acquisitions. 

Activity from inter-regional investors increased this quarter, accounting for 19% of acquisitions. Only Asian and Middle Eastern investors were net buyers over the quarter at €1.5 and €1.1 billion respectively, reflective of a number of high profiles deals over the period. In contrast European investors were the net sellers by €1.6 billion, primarily driven by UK investors who sold a net €1.5 billion predominantly in the UK. 

Magali Marton concluded “uncertainty over the recovery in Europe’s economies poses a downside risk to the recovery. This combined with planned legislative changes to German Open Ended Funds, means that we have seen a reduction in net flows to open ended funds which could hold back significant new investment in the short term. On a more positive note however, overall demand remains strong and the weakness of the Pound and the Euro against the dollar make Europe’s real estate markets attractive to overseas investors, with investment flows from the Middle East and Asia likely to persist.” (BBJ)