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EMEA Capital Markets Snapshot I Q1 2021

Q1 2021 saw momentum continue in the Industrial & Logistics and Living sectors however, there was a pause to large scale office transactions which led to many countries seeing investment volumes half in comparison to Q1 2020. Investment into direct European Real Estate reached €51bn, a 35% fall on Q1 2020. However, it is worth noting that Q1 2020 was the second highest Q1 figure posted in the last 10 years, and the figure masks a range in performance across countries.

The Industrial and Logistics sector continues with strong momentum while large scale office transactions have slowed in European investment volumes, as many countries saw overall activity halve in comparison to Q1 2020.

Richard Divall, Head of Cross Border Capital Markets, EMEA at Colliers, explained: “The Industrial and Logistics sector continues to thrive with falling yields in almost all markets and premiums being paid for portfolios. Investors are willing to go up the risk curve in this sector, although some investors are showing initial concerns to pricing and whether developers will push rents far enough in a falling yield cap rate environment”.

Due to the third wave of the pandemic in Europe many tender processes have been delayed, however there is activity in ‘off market’ and small tender processes. Despite the absence of large scale office transactions in Q1, sentiment remains positive for low risk, core assets in prime locations and we expect several large scale assets to be marketed in Q2 2021 and, when the return of international travel permits, volumes to pick up”.

The living sector continues to have high demand in the Nordics, as well as in Italy and CEE as an emerging asset class. Positive sentiment is also returning to the UK Student Housing market. There continues to be significant interest in the alternative sectors including life sciences, senior living and asset backed by technology sub sectors.

The hospitality sector is seeing more interest with several markets reporting transactions for the first time since the pandemic started. Several core and forward hotel deals have entered the market and great anticipation towards new pricing awaits.

France

Investment volumes were down in Q1 2021 compared to Q1 2020. Large-scale transactions were rarer than usual, with a corresponding impact on acquisition volumes. The ongoing health crisis is causing sellers to adopt a wait-and-see attitude. Yield pressure remains in core and value-add assets in Paris with strong international demand building.

  • The next quarter should see a resumption in the marketing of assets for sale, with sellers having to act on disposal plans scheduled for 2021.
  • Larger investment volumes are expected to materialise in the third and fourth quarters, especially since France is one of the destinations targeted by investors.
  • In the first quarter, it was mainly national investors who were active, in particular insurance companies and Société Civiles de Placement Immobilier (SCPIs).
  • On the international investor side, the Germans are still present and are still looking to buy core assets, a type of asset that is in high demand and whose pricing level is confirmed. In Q1, pressure remained strong on core and value-add assets in Paris. Assets that are less well located or which have leases that are less secure are those for which the pricing level is revised downwards.

Related Experts

Laurence Bouard

DIRECTRICE ETUDES et RECHERCHE

Paris

Graduated in urban planning and member of RICS, Laurence has more than 20 years of experience in the real estate sector. Since 2011, she has been the head of the Research Department at Colliers International France. She provides its expertise on the real estate markets through consulting missions and the production of ad hoc studies.

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