• Total nominal value of the European Commercial Real Estate (CRE) investment debt decreased slightly over the course of 2016 from €1.14 trillion to €1.06 trillion, which is largely attributed to reduced levels of investment transactions in 2016 • We estimate that new debt issued increased from €68 billion in 2013 to €125 billion in 2015, while maintaining at €116 billion in 2016 • Additionally, the amount of debt retired in 2016 is also in line with the new origination levels over the past year • 2016 was the first year, since post-GFC loan sale activity commenced in Europe, that real estate secured loan sale activity fell • In 2017, we expect loan sale activity to pick up from 2016, albeit the activity will be relatively concentrated across several key jurisdictions, for instance Italy and Spain
The overall European hotel investment volume was up +31% y/y for Q2 2017. This contributed to a +6% y/y increase for H1, with the deal volume reaching almost €9 billion. The Spanish hotel investment market soared with a significant increase of +228% y/y in transaction volumes, reaching over €2 billion for H1 2017. Italy and the Nordics also saw significant growth for the same period. The declining investment volumes for the United Kingdom and Germany are mainly attributed to a shortage of investable stock and large portfolio transactions in H1 2016,
Expect a year of political uncertainty and the challenge of rising interest rates in Europe in 2017 Politics aside, however, the gradual tightening of some occupier markets seen in 2016 will continue in 2017, especially for better properties in the better locations Despite a gradual turnaround in the long-term interest rate trend, there is still scope for further yield compression in prime assets as rental growth and low interest rates by historical standards continues to make property look attractive 2018 or 2019, rather than 2017 are likely to be the years when the yield cycle starts to turn
