European transaction volumes showed strong improvement through the first quarter of 2011 (Q1’11), with sales of €31.8 billion marking a 40 per cent year-over-year (YOY) increase and providing for a sixth consecutive quarterly improvement. Increasing volume has not translated into similar gains in prices as yields have remained relatively stable for the past four quarters. Overall the increase in European activity was slightly greater than the global market, which grew 23 per cent YOY, significantly boosted by strong Americas growth of 75 per cent while being restrained by a slower Asia Pac increase of only 9 per cent. Notably, robust core and struggling peripheral markets are further reflected in investment trends dominating the European marketplace.
The UK, Germany and France all performed strongly. Germany has emerged as a primary target of investors, especially cross-border buyers. Not only are cross-border acquisitions rising among European investors, but Europe has also become the target for the majority of global cross-border transactions.
Transactions involving office, retail and industrial properties accounted for €26.7 billion of Q1 volume and posted greater growth of 48 per cent. This is was mainly attributable to robust sales in retail, which outperformed all other property types and surpassed office volumes for the first time in our European-wide data series. This growth in retail activity was significantly fortified by four transactions that each exceeded €1.0 billion.
The largest European investment markets – UK, Ger-many and France – witnessed the strongest YOY growth in transactions, up 58 per cent, 40 per cent and 64 per cent, respectively. Germany, while experiencing the lowest overall growth of the three, had the strongest growth of any country in cross-border acquisitions over the past year on a global basis. London and Paris showed continued YOY gains, as a significant concentration of capital remains focused on core liquid markets. However, secondary rather than primary markets across Europe are showing the strongest YOY gains – Manchester, Warsaw, Hamburg, Milan and Prague all saw triple-digit percentage gains through Q1’11. The key prime German centers of Frankfurt, Munich and Berlin declined YOY in Q1’11, with more secondary market and portfolio transactions contributing to the country’s overall improved volumes. Poland and Czech Republic are leading a focused improvement in Central European markets. On the periphery, Italy and Ireland saw big YOY gains albeit from a low 2010 base. Both Russia and Portugal suffered notable declines in activity, as the latter’s economic and finnancial concerns took hold.
Investors from the U.S. remain the largest cross-border investors in Europe but the scale of acquisitions has been greatly reduced, from over €60 billion in 2007 to just €12.5 billion over the past 12 months. U.S. investors sold almost as much as they purchased in Europe in the past year. Canadian investors, with over €3 billion in acquisitions and few dispositions over the past year, are now the largest net buyers in Europe and along with Asia (excluding Japan).