Rise in activity seen in Q2 continued into Q3, with investment volumes in major markets expected to recover further
Leading cities including London, Milan, Paris and Frankfurt saw major single-asset deals in the July-September quarter, as investor confidence rebounded further from a slow start to the year. Prime office assets located in the centres of national capitals remained the major draw for investors seeking secure repositories of value.
“The vaccination roll-out across Europe has unlocked international travel and allowed more buyers to physically inspect potential acquisitions,” said Luke Dawson, Managing Director, EMEA Cross-Border Capital Markets, Colliers. “This has done a lot to improve confidence levels and encouraged investors to act on the opportunities emerging across markets and asset classes.”
Logistics assets remained a key area of focus amid steady growth in e-commerce and the supply chain constraints highlighted by the pandemic. While investors remain cautious on hard-hit retail and hospitality properties, activity is beginning to pick up in these sectors in markets like Spain. This uptick can be attributed to investors realising that as holidaymakers and business travellers return some hotel assets could be undervalued and offer a good investment opportunity now. Both retail and institutional investors continued to demonstrate strong interest in residential and particularly build-to-rent (BTR) assets in urban areas throughout the region.
Moving into Q4, Colliers predicts markets will remain active, with investors watching for any upsurge in COVID cases in the winter months. Also, on the investment radar will be the outcome of coalition negotiations in countries that have held recent elections such as Germany and the Czech Republic, amid mounting scrutiny of investment in the residential market in cities such as Berlin.
Regardless of short-term trends, overall sentiment is expected to remain positive as the new year approaches. “Investors clearly believe the tide has turned,” said Richard Divall, Director | Cross Border Capital Markets, Colliers. “They are adjusting their strategies for a return to healthy economic growth and a focus on sustainable development that will shape regional property markets for the better in the years ahead.”
UK market remains active despite slight dip
Some £11 billion was invested in UK property sector in Q3, a 10% rise on the same quarter of 2020 – although this was still some 25% under the five-year quarterly average, and also below the £16 billion invested in Q2. Rather than fundamental weakness, the slowdown was attributed to seasonal factors such as the school summer holidays, along with ongoing travel restrictions and a ‘pingdemic’ related to the country’s COVID track-and-trace system.
Allianz megadeal shows continued allure of Germany’s financial centre
Allianz’s acquisition of Tower 1 of the FOUR development in Frankfurt for some €1.4 billion represented the largest single-asset transaction in Germany so far in 2021. Offices have no competition as the dominant traded asset class in Europe’s biggest economy, representing 50% of all deals. Retail assets trailed far behind, with 16% market share.
Investors flock to regional hubs in France
France’s regional cities are seeing a surge of capital into logistics and commercial assets, with a marked presence of foreign investors. While overall transaction volumes through Q3 are down on last year, the number of transactions has shown less of a decline, as the market has refocused on smaller deals, particularly in the €50 million to €100 million bracket.
Logistics dominates in Italy
Logistics deals accounted for almost 50% of quarterly investment volume in Italy - a new record for market, reflecting new post-pandemic commercial realities of delivery on demand. Foreign investors have dominated the Italian market in the year to date, accounting for 74% of total volume.
Dash for hotels in Spain
With travel restrictions lifting in Europe, investors have realised that some hospitality assets may be under-priced. In Spain, Q3 witnessed frantic competition to get a slice of the hotels sector as the return of travel saw tourists flock back to Spanish beaches, with investment volumes topping €1.2 billion. Alternative assets are also attracting attention in Spain, with investors increasingly interested in data centres and residential care homes.
Core products and PRS market in the investors' interest in Poland
Poland recorded a transaction volume of around €1.5 billion in Q3 2021. Since the beginning of the year, nearly 40 transactions took place here, in which sixty properties changed owners.
“Although we have seen a decline in investor activity in the main asset classes, this has been compensated by, among others, the PRS sector, which accounted for 15% share of volume. Only this year, in seven transactions with a total value of €600 million, investors have signed contracts for the construction of around 5,500 flats for rent,” said Dorota Wysokińska-Kuzdra, Senior Partner, Head of Corporate Finance and Living Services, CEE, Colliers.
Among the largest transactions in this sector were the acquisition by Heimstaden Bostad from Budimex Nieruchomości of 2,496 apartments located in major Polish cities and the signing by NREP of a contract with YIT for the development of 1,071 apartments in Warsaw.
Recovery can also be seen in the private student housing segment. Two transactions for a total of over 300 units were finalised here in Q3.
Activity in the office and warehouse markets is also slowly returning. Especially the latter is attracting a lot of interest from investors.
„Warsaw continues to be the centre of investor activity interested in the office market. Acquisition of the prime Metropolitan office building in the Warsaw CBD by Morgan Stanley from DWS for a reported €240 million, and the sale of buildings G and H in the Warsaw Breweries development to DEKA by Echo Investment for €150 million create a new benchmark for valuations in a post-pandemic reality and demonstrate the strong appetite of investors for core products and their confidence in the long-term development of the Warsaw office market,” said Piotr Mirowski, Senior Partner, Head of Investment Services at Colliers in Poland. “The warehouse sector continues to develop dynamically. The volume of transactions in this asset group remains high, with record liquidity creating additional upward pressure on prices”.
More than 2.1 million sq m of modern warehouse space with a total value of €1.6 billion has already been sold in the three quarters of 2021. Examples of transactions from this sector include the acquisition of a portfolio of five logistics parks with a total GLA of 209,000 sq m by Reino Capital on behalf of Grosvenor Group, as well as the purchase of a logistics park in Gdańsk with a total GLA of approx. 52,000 sq m by Generali. The vendor was 7R.
Download the Colliers EMEA Market Snapshot – Q3 2021 here.