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2018 record year for European real estate investment

• Total 2018 investment volumes up 0.3% on 2017
• Record performance in the Netherlands, Poland, Portugal and Spain
• Office investment volumes in 2018 up 6% on 2017
• Record investment levels in hotels and alternatives 
• Retail real estate was the most demanded segment in the Russian investment market for the second year in a row

London - Moscow

  European commercial real estate investment volumes reached a record high of €312 billion in 2018, according to the latest data from leading global real estate advisor, CBRE. This represents a 0.3% increase on 2017, which was previously a record, when total investment volumes reached €311 billion.

France, the Netherlands, Poland, Portugal and Spain all posted record levels of investment in 2018 with Spain and Portugal both registering increases of more than 50% on 2017 (56.9% and 51.4% respectively). Spain performed particularly well in the latter half of 2018, driven by several large platform deals including Blackstone’s acquisition of Hispania and a majority stake in Testa. Germany saw its second-highest year of investment on record, with 2018 volumes reaching €77 billion, up 5.9% on the €73 billion recorded in 2017.

Total investment volumes for the UK declined by 6.5% for the year as investors were more cautious in their underwriting amid geopolitical uncertainty; however, activity in Central London rose 10% compared with 2017. 

The ‘beds’ sector proved popular with investors in 2018. Hotels and other alternative sectors both achieved record investment volumes of €22 billion and €21 billion respectively, with the growth in alternatives primarily driven by the Healthcare sector. Additionally, the residential sector saw record investment volumes of €50 billion, up 22.4% on 2017 and cementing its position as the second-largest asset class, surpassing Retail for the first time.

However, Offices remained the largest investment sector, with total volumes across Europe reaching €127 billion, an increase of 6% compared to the previous year. Industrial and Logistics continued to perform well throughout 2018. However, having undergone a consolidation period in 2017 with a number of large platform transactions, investment volumes in 2018 were down 23.5% to €33 billion. If the exceptional €12.25 billion Logicor deal which transacted in 2017 is excluded, Industrial and Logistics turnover would have been up 6%.

Jonathan Hull, Managing Director, EMEA Investment Properties, CBRE commented:

“2018 proved to be a record year for real estate investment, with Continental Europe remaining particularly strong. There is certainly a scarcity of prime product across the major capital cities within Europe, which has driven yields to record lows yet capital flows towards the real estate sector remain strong, as real estate remains attractive relative to many other asset classes. The spread between prime office yields and bond yields is currently close to a record high, a positive indicator for many investors. ‘Beds and sheds’ remain the growth sectors across Europe as investors look to diversify their portfolios and seek certainty from these sectors, which are less cyclically exposed.” 

Irina Ushakova, Senior Director, Head of Capital Markets CBRE in Russia said:

“Russian real estate investment market shown different from the majority of European markets dynamics. In 2018, the volume of investments decreased by 45% YoY and amounted to $2.8 bln. Foreign companies’ investments remained at the level of the previous year, but the volume of Russian investments decreased by more than 2 times. Retail real estate was the most demanded segment in the Russian investment market for the second year in a row, but the office segment may come to the fore in the volume of investments this year due to the improve of office real estate market conditions and stable demand from tenants. In 2019, we expect growth in real estate investment in Russia due to a number of transactions that were expected to be executed in 2018, deferred investment demand and high activity of tenants in the commercial real estate markets. The growth of Russian capital is expected, including at the expense of regional players, as well as an increase in the volume of investment by Russian real estate investment trusts, which did not show their potential last year.”