U.S. Investors Becoming Major Buyers in European Commercial Property Market

Posted on 20 August, 2012 by Jodee Redmond

Commercial property investors from the United States are choosing to invest in European properties in a big way. This shift in the makeup of the investors’ marketplace comes after several years of North American investors taking a back seat to buyers from different parts of the world.

U.S. investors were most likely to make purchases in the UK, followed by properties in Germany and France, according to Global Capital Trends, a research firm. U.S. private equity firms which have been investing or actively seeking properties in these countries include Blackstone Group LP and Cerberus Capital Management LP. Real estate management firms, are also investing in the European commercial property market.

The level of money invested in commercial property worldwide has increased in the second quarter of 2012 to $157 billion. The market in the United States has been seen as a safe haven for foreign investors, and capital has been flowing into the country from China, Japan, Korea, Israel, and The Netherlands.

In the first six months of 2012, global commercial real estate sales were down 23 per cent to $306.3 billion. This figure is approximately $100 billion lower than sales for the first or second halves of 2011, according to the Global Capital Trends report.

Top Four Destinations for Investors

Where are American commercial investors choosing to buy in 2012? Here are the top four destinations:

1.  London office market – $9.51 billion invested in the first six months of the year, down five per cent from one year ago

2.  Tokyo office market – $6.22 billion invested in first half of 2012, down 19 per cent

3.  New York office market – $5.85 billion invested since first of the year, down 21 per cent

4.  Paris office market – $5.19 billion from January of 2012, down 7 per cent

The report also pointed out that some investors were more likely to consider less than first-class buildings due to low initial yields. Paris and Tokyo saw renewed investor confidence in retail space, with more money being put into shopping centres.

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