After a positive return in Q2, European take-up fell back by 6.9% in Q3 2014 reflecting fresh concerns over the strength of the economic recovery in Europe. With a few exceptions a sustained period of improving occupier demand has not yet emerged across European markets. The EU-28 vacancy rate recorded the sharpest quarterly drop since 2007, falling to 11.2%. The decline was driven by reductions in vacant space in key markets including London and Frankfurt. Prime rental growth continues to be confined to the strongest performing markets – namely London, Dublin and Oslo in Q3. In most EMEA markets occupier demand is yet to improve to a level which would generate prime rental growth. Office completions for 2014 are expected to increase by around 20% on the 2013 level and are forecast to reach a similar level in 2015. These levels are around 50% below the peak of development in 2007/08.
At €50.8 billion, Q3 2014 continued to see a steady increase in the levels of CRE investment in Europe. Exceptional growth was recorded in both Spain and Ireland. Other ‘recovery markets’ of Italy, the Netherlands, and Portugal collectively exhibited healthy growth. Yield compression was particularly evident in the industrial sector this quarter – with a rise in investor demand also driving up its share of the overall market.
Continued growth in Q3 2014 with further yield compression across all property sectors The most substantial changes occurred in the industrial and logistics sector Overall rental performance remains patchy, with almost as many locations falling as rising this quarter
Q1-Q3 European retail investment at €33bn - highest Q1-Q3 total since 2007 UK and Iberia region have seen the strongest increases in activity so far this year CBRE expects further yield compression and potentially a record high for European retail investment activity in Q4 2014
European CRE investment totalled €48.4 billion in Q3 2014, a 4% increase on Q2 2014, but a more substantial 27% increase on Q3 2013. Ireland achieved its highest total ever this quarter with €1.6 billion, surpassing the previous high in Q3 2006 of €1.5 billion and in Spain, the €3.5 billion invested in Q3 2014 was the country’s second highest quarter on record. The core markets of UK and Germany continue to show strong growth, with both countries recording increases of over 20% compared to both the previous quarter and Q3 2013.