Germany commercial real estate investment activity accounted for more than one-third of the European market share in the first nine months of 2020.
The share of German investment activity increased from 28%-34% from Quarter 1-Quarter 3, according to the latest research from Savills.
At the same time, the UK market share fell from 27%-20%, although it remains in second place. France, which also saw a decline to 11%, is in third.
The last quarter of the year is crucial, as investment volumes are normally around 50% up compared to the first three quarters.
Retail share rises
So far, office investment has fallen from a 40% share in 2019 to 34%, with retail up from 13%-15% and multifamily from 12%-17%. Logistics rose from 12%-13% of total transactions and would have been more, but for a shortage of prime stock.
European average prime office yields have hardened from 3.61% to 3.60%, but yields are starting to diverge between core and non-core markets.
From Q1-Q3 2020, prime office yields have compressed in Oslo (-40 bps), Milan (-25 bps), Paris CBD (-15 bps), Stuttgart (-10 bps) and Hamburg (-10 bps). However, Warsaw (+40 bps), Manchester (+25 bps), La Defense (+25 bps) and Helsinki (+10 bps) increased.
Average prime logistics yields have compressed over the last six months by 7bps to 4.84% and multifamily yields are now stabilising in most markets.
Mike Barnes, Associate European Research, Savills, says, “In many respects, the supply/demand dynamic appears similar to 2019 with rising equity commitments to European real estate, although we are observing a shift back to core strategies.
“As we move into 2021, we expect to see more price-point clarity emerging for core-plus, given the shortage of vendors for ultra-core/core stock. We are maintaining our European investment volumes forecast of between €220bn and €260bn during 2020, down 15-30% yoy.”
In Central and Eastern Europe, investment fell 14% but was still the third best year on record. It was buoyed by over €3.3 billion of portfolio transactions, which accounted for 44% of the total investment turnover compared to 24% last year. The shares were particularly high in the Czech Republic (67%) and Poland (47%).