European Property Values return to Pre-Recession Levels

Posted on 15 September, 2015 by Cliff Goodwin

The value of European commercial property held by investors hit a new record of €3.4-trillion (£2.4-trillion) last year — a rise of three per cent on 2013.

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According to the 41st annual Money into Property report published by the global real estate services company DTZ, the latest increase in values means levels have now recovered from the downturn and stand above their previous 2007 peak.

The report claims that three of last year’s top 10 growth markets were European, including Turkey which saw the strongest stock value growth of 30 per cent, albeit from a relatively low base.

Two Nordic markets — Finland at sixth, with a 15 per cent growth, and Norway in 10th with 12 per cent — also make the top 10 with solid double-digit increases in stock value.

The DTZ survey shows, however, that nine of the bottom 10 growth markets globally were also European. These markets saw their stock fall in value over the year, led by Russia’s dramatic fall of minus-19 per cent after investment collapsed in the wake of economic sanctions and hostilities in Ukraine.

Spain saw values fall by eight per cent and, to a lesser extent, the UK which reported stock values decline by two per cent; both driven by further falls in debt.

“The burden of debt across Europe has hindered its growth,” explained Nigel Almond, head of capital markets research at DTZ. “The struggles of highly-leveraged European markets such as the UK, Ireland and Spain in recent years contrast with lower leveraged markets in Asia, for example, which have benefitted from stronger growth.”

Globally, investment volumes reached €557bn (£408bn) by the end of 2014, a 20 per cent increase on 2013. Growth was observed in all three regions, led by a 32 per cent increase in Europe.

Analysing all global deals in excess of €18m (£13.2m), the report shows that London attracted by far the largest share of investment with €31bn (£22.7bn). Paris was sixth with €15bn (£10.9bn), the only other European city in a top 15 dominated by US cities.

Nigel Almond added: “With record levels of new capital targeting commercial real estate, global investment activity is set to reach €678bn (£497bn) this year, just short of the €696bn (£510bn) record in 2007.

“In Europe we see volumes reaching €250bn (£183bn) this year, which would surpass their previous peak of €230bn (£168bn)  … And we expect the appetite for investment continuing into 2016 as real estate still looks attractive to other assets in the current low interest rate environment.”




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