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European property markets see surge of year-end activity, with an increase of 39% compared to Q4 2020

Q4 activity signals sustained deal making anticipated in 2022

Investors brushed aside concerns about the impact of the omicron variant to make the final quarter one of the biggest of 2021 for European property, with major markets posting near-record trading volumes, according to the latest Capital Markets snapshot for Europe, the Middle East and Africa (EMEA) released by Colliers, a global leader in commercial real estate services and investment management.

In France, the final quarter transformed the picture for 2021 as a whole, accounting for 41% of the annual transaction volumes. It was Germany’s second-strongest final quarter in the past 10 years, while in Italy the sale of the Reale portfolio for €1.3 billion to Blackstone marked the country’s biggest property deal of the past 10 years. In the UK and Ireland, investment rebounded to levels not seen since before COVID-19.

Industrial and logistics assets once again proved a magnet for investors seeking to tap into the economic shifts accelerated by the pandemic. Despite this, there was no shortage of interest in office properties in prime markets such as Germany and the UK. “Investors clearly expect offices to remain central to the workplace, especially given rising awareness of the downsides of remote working, and that omicron appears less virulent than previous COVID-19 variants,” said Luke Dawson, Managing Director, EMEA Cross Border Capital Markets.

There were also signs of renewed appetite for hotel and retail assets, which were hit badly by the pandemic, notably in Mediterranean states. “In markets like Italy it’s notable that investor interest in hospitality venues is now much stronger, despite the pandemic not having resulted in any broad price reductions”.

The eagerness of investors to deploy capital is such that many markets are facing supply-side constraints going into 2022. “It’s becoming difficult to find acceptable yield in sectors like logistics and core offices in some markets,” said Richard Divall, Director, Cross Border Capital Markets. “This may encourage investors to shift towards segments that were more overlooked in 2021, such as retail, or to explore broader segments of the risk curve.”

UK market recovers from the pandemic

UK property saw some £13 billion (€15.6 billion) invested in Q4, a figure expected to rise as deals are updated in the database, pushing the annual total to the highest levels since the pre-pandemic days of 2018. The industrial sector was the stand-out, attracting £15 billion over 2021 – by far the highest annual total on record.

Germany poised for a year of performance

Germany posted its second-strongest closing quarter in a decade in Q4 with more likely to come, as numerous transactions were postponed into the new year. Based on this we expect commercial real estate investment volumes for 2022 will at least match the €60 billion posted in 2021 and could potentially climb much higher if the country avoids further lockdowns.

A landmark year for industrial & logistics assets in France

France saw an 8% decline in market activity in 2021 compared to the previous year, finishing at €25 billion. However, there was a dramatic upswing in Q4, which alone saw an investment volume of €10.3 billion as a result of a surge in large (€100 million+) transactions in Paris. Offices remained the most popular asset class, but the industrial & logistics (I&L) sector posted a record year, making up an unprecedented 25% of all activity.

Industrial & logistics overtake offices in Italy

Offices are no longer the most popular asset class for commercial real estate in Italy, with industrial and logistics assets now in pole position. The unprecedented appetite for the bricks and mortar of modern commercial infrastructure was illustrated by Q4’s €190 million purchase of the Amazon Cividate fulfilment centre near Bergamo by South Korea’s Midas.

Hotel revival continues in Spain

Investment in Spanish hotels reached €733 million in the fourth quarter of 2021 and €3.18 billion for the year as a whole, making them the country’s most popular asset class of 2021. Investor appetite and liquidity are at record highs and there is little pressure on sellers to drop their prices. The quarter saw Sixth Street entering the industry, advised by Colliers, via the acquisition of five holiday hotels for €85 million including refurbishments.

Download the Colliers EMEA Market Snapshot – Q4 2021 here.