According to the latest study of the CBRE Group, half of the European business investment in the first quarter of 2012 was in the office sector because of the increasing excess in quality office space in the market and the strong demand of investors (Q1 2012). estate agents
In the first quarter of 2012, the office sector led and invested 12 trillion euro (USD $15 trillion) and accounted for half of the industry. The average prime yield in the office sector grew, notwithstanding the amount of transactions, by 6 basis points to 5.69%. The European office market expects assets to change this year to about €45 billion to €50 billion (USD 57 billion to €63 billion), with equity-richer purchasers like Sovereign wealth funds and foreign pension funds still among the types of buyers most active.
Two major transactions already occurred this year were the sale of the Maximilianhöfe in Munich, a premium mixed property bought by Pembroke Real Estate for approximately €540 million, and the purchase by the Qatar Investment Authority of 1 Cabot Square at Canary Wharf, London, for some €400 million.
The performance of the office industry has reversed a three year pattern in which retail property has continuously increased as a share of the European market. Following significant retail investment in 2010 and early 2011, retail activity decreased to the lowest level since the beginning of 2007, which accounts for 19% of the market in Q1 2012. Despite a decrease in transactions, the average retail yield continued to shrink in the first quarter of 2012, showing that product shortages are driving activity, rather than lack of demand.
"We found that prime retail property continues to be demanded by investors," said World Property Channel Jonathan Hull, CBRE's Head of EMEA Capital Markets. "However, the availability of attractive new investment possibilities at the beginning of this year was extremely modest after high levels of activity in prior years."
On the other hand, the office business offers a different story: The number of high-quality office buildings on the market grew in 2012. This has inspired a considerable interest on the part of investors, who view the recent lack of building as a potential driver of future rental growth - or at least as a factor which will maintain a stable vacancy and rental income on high quality properties."
The European commercial property investment industry totalled €23.8 billion in Q1, 2012, down 18% from the same period last year. Given the declines in the projections of economic growth since mid-2008, the downturn was no surprise. The pipeline for significant but not yet completed transactions, however, shows that the numbers will marginally improve in the second quarter of 2012.
In the wake of the eurozone crisis, the UK, Germany, and the Nordic countries are the main regional markets for office investment and commercial real estate investments in general. The Nordics recorded more than €5 billion in revenues in the first three months of 2012, the greatest quarterly turnover since the fourth quarter of 2010. Local and global investor interests continue to increase as a result of the region's economic independence from the euro and relatively robust domestic economies.
'Recent political developments will rise in short term, notably the French presidential elections and the Greek parliamentary elections,' noted Hull. This may have an impact on investment activity. The demand for primary property in key areas remains unchanged."