•CRE investment in Europe totalled €54.0 billion in Q2 2016, slightly up on Q1, though down on the €66.6 billion recorded in Q2 last year. •Lower levels of investment in Europe’s two largest markets; the UK and Germany, have dampened the European total. •The Irish market saw €2.3 billion transacted; a record level of activity. The total was boosted by a couple of high value transactions including Ireland’s largest shopping centre, the Blanchardstown Centre. •Of the main sectors offices had the strongest quarter, with €23.7 billion invested. This was a 8.3% increase on Q1 2016, driven by strong performance in the Nordic markets.
Despite continuing globalization of the real estate industry and stronger cross-border interplay between the real estate and capital markets, the national markets are still dominated by national and regional characteristics The rental market is gaining considerably in importance over ownership, due to affordability factors, as well as the more flexible lifestyle it offers, in particular for younger people Both the importance of institutional investors and the size of the private letting market, in comparison with the state-controlled segment, vary considerably between countries and have strong influence on the availability of adequate numbers of housing units. Owner - Occupation varies between 78 percent in Spain and 34.6 percent in Switzerland
The second report in the acclaimed Check In series of though-leading publications; focused on fixed-income hotel real estate investment. Some of the key findings in this report are: 31% of total new room supply coming to the market is expected to have a long-lease structure in place Pricing remains attractive – risk premium in excess of 300bps for prime regional assets Income strips increase in popularity but their sustainability is debatable Funds are increasingly considering the underlying real estate but covenant remains important Investors express greater appetite in Europe as influential players launch funds on the continent Hotel capital value growth surpasses other asset classes post-2013 in the long income space
Since we produced our first report on the EU referendum in February, the bookmakers’ odds against a leave first drifted out from 9/4 (31%) to 9/2 (18.2%) but they have now firmed as the leave campaign has gained momentum and some bookmakers are now quoting 2/1 (33.3%). The opinion polls are still neck and neck and the Stay campaign has serious concerns that the pro-stay majority in the younger age groups are far less likely to vote that the pro-leave older age groups. With only a few exceptions, economic impact studies are continuing to warn of the detrimental impact of a Leave vote. From a property standpoint, the sectors most at risk if there is a Leave vote and if it has a negative economic impact are financial services, legal and accountancy and the tech sector. London is most at risk with Frankfurt and Paris and, to a lesser extent, Amsterdam and Dublin poised to gain from any financial service fall out and Berlin, Paris, Dublin, Amsterdam and Stockholm looking best placed to gain if the UK’s tech-sector takes a hit. Almost as many of our clients expect a lose-lose outcome as do a lose-win scenario. This is because of worries that without the UK, the EU could be subject to further fragmentation, a more anti-competitive policy agenda or even another euro-crisis.
Our latest annual debt review provides comprehensive analysis of 2015’s trends and considers how and why 2016 may be different. Our key conclusions are: Last year, new lending doubled, rising to €127 billion based on a record €273 billion of CRE investment. Lending margins were generally stable for bilateral lending and LTV levels stayed low, by historic standards. Despite the rise in new debt issuance, the total value of European CRE debt in 2015 was only slightly higher than in the previous year, at €1.1 trillion, because new lending was offset by the retirement of existing debt. NPL activity was robust. Sales were up 23% in 2015 to €85 billion. Dry powder for loans and distressed assets is high and pressure is rising on European banks which have yet to address long-standing, non-core loan books, meaning the pace of deleveraging will continue. Investors have become more cautious. This change in sentiment is a factor in a slowdown in 2016 investment activity and is likely to affect loan pricing.