Commercial property purchases are solidly in the black in the first half of 2015, according to London-based broker Knight Frank LLP. Investment transactions have totalled 104.2 billion euros ($117.5 billion). The number of deals more than doubled in Spain and tripled in Portugal.
International Investors Jumping into the Market
International investors have been diving into the market to take advantage of low property prices in the wake of the European Central Bank president’s attempt to kick start economic growth, which triggered a 19 percent drop in the value of the euro against the dollar and an 11 percent slump against the British pound. Rents are getting set to rise as the economy recovers due to the lack of new construction since the global financial crisis, according to asset manager M&G Real Estate.
David Jackson, who manages 1.2 billion euros of European property at M&G real estate, said, “After a couple of years of double-digit returns in the U.K. and the U.S., investors feel Europe is next. One of the key stimuli for that has been the QE package.”
Total Returns Highest in Years
Total returns (retail income and value gains) from commercial real estate in mainland Europe was 4.45 percent in the second quarter. This is the highest level in six years; it was four percent during the pervious two quarters, according to MSCI.
Knight Frank said that property owners are getting the best yields from properties in Lisbon (six percent) and Barcelona (five percent), compared to London’s West End (3.5 percent).
Andrew Sim, the head of European capital markets at Knight Frank said in a statement, “Investment volumes continue to be driven upwards by the strong international demand for European commercial property, particularly from U.S. investors. European transaction volumes are approaching the levels seen at the market peak of 2007, and several countries may well set new records this year.”
Commercial property investment in Europe, including the United Kingdom, is forecast to total 230 billion euros in 2015, making it the most active market since 2007, according to Knight Frank.
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