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EMEA Direct Commercial Real Estate Investment Activity Year-on-Year up 4% in Q2 2011 and 17% for H1 2011

Strong Northern European activity contrasts Southern European declines, while UK Q2 volumes fell against stellar first quarter, according to Jones Lang LaSalle

London, 14th July 2011 –Following a stellar performance in Q1 2011, which saw a 32 percent year-on-year increase, direct real estate investment volumes in Europe during the second quarter of 2011 (Q2 2011) reached €24.8 billion, reflecting four percent growth compared with the equivalent period last year, according to the latest Global Capital Flows research from Jones Lang LaSalle.  Although growth slowed in Q2 2011, investment activity in the first half of the year (H1 2011) is still up 17 percent year-on-year.  Second quarter growth rates were quite diverse across Europe; Northern Europe reported strong increases in volumes, while the UK and Southern Europe saw declines.

Robert Stassen, Head of EMEA Capital Markets Research at Jones Lang LaSalle commented: “The first quarter of this year saw some exceptionally large deals completing, including the sale of the UK’s Trafford Centre (€1.9 billion) and the Centro Shopping Centre in Germany (€650 million), but this momentum did not continue during the second quarter. Although this would explain much of the quarterly volatility, tight supply of product, particularly in the popular Central London market may also have held back investment volume growth.”

Robert Stassen continued: “Current market evidence suggests that larger deals now take longer to close and we suspect that some deals currently under offer have been pushed back into the second half of the year. The average deal size in Q2 2011 was €37.4 million, down from €46.3 million in Q1 2011 and €41.5 million in 2010.”

Germany’s investment market performed well in Q2 2011, recording an increase in investment volumes of 36 percent compared with Q2 2010 and accounting for around 22 percent of the total activity in Q2 2011.

Hela Hinrichs, Director EMEA Research at Jones Lang LaSalle, added: “In addition to the more liquid markets, such as Germany and the UK, other countries have seen increased activity; for example, the Nordics and Russia both reported better than anticipated investment volumes.  Russia saw activity up over 200 percent on the equivalent period last year and the Nordics recorded increases of 70 percent year-on-year and 83 percent quarter-on-quarter. Sweden was particularly active with over €2.0 billion traded, an increase of almost 50 percent in comparison with the equivalent period last year.” 

Hela Hinrichs added: “Unsurprisingly, following the additional EU bail-out in Greece, investment volumes in Southern Europe were sluggish; reporting volumes down 70 percent year-on-year. Italy, though, was most resilient decreasing by 39 percent.”

Although the UK remains the most liquid real estate investment market in the EMEA region its investment volumes were down 14 percent (11 percent in Sterling) compared with activity levels in Q2 2010.  This followed an exceptionally strong first three months of the year where volumes increased 44 percent year-on-year resulting in a more modest 12 percent increase for H1 2011 versus the same period last year.

Robert Stassen concluded: “While demand for London assets remains relatively healthy, London’s City and West End office markets have been characterised by an extremely tight supply of prime assets and this is expected to continue through to year end.  Tight supply is not just constrained to the offices market; there is demand from sovereign wealth funds for super-prime shopping centres yet limited suitable product has come on to the market.”

Offices accounted for 49 percent of European volumes in Q2 2011; reclaiming the top spot, while retail, although remaining popular amongst investors across the region, accounted for 27 percent of activity across Europe.  The share of industrial declined to 8 percent from 9 percent quarter–on-quarter. In the buoyant German market, however, retail took the greatest share of activity with 44 percent. Investors across Europe continued to resist compromises on quality and remain focused on income growth – a trend from which German retail is benefitting.

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Notes to Editors:
• Entity-level transactions, land acquisitions, development projects and multi-family residential investment are excluded from our data as well as deals below $5 million.
• Cross-border investment is where purchaser, vendor or both originate from outside the country in which the asset is located.
• Cross-border investment is classified as ‘intra-regional’ investment (both purchaser and vendor originate from the region where the asset is located) and ‘inter-regional’ investment (purchase, vendor or both originate from outside the region in which the asset is located.
• Global Funds are funds which raise capital in multiple regions.