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June 5, 2017

Brexit negotiations, Dutch elections and prolonged political tension ahead of elections in France and Germany, while threatening, did little to upend European investment volumes in Q1 2017, which surpassed their pace from last year and were up three percent.

The UK posted its strongest quarter since 2015 in local currency terms. On the continent, Germany continues to be an engine for growth setting a record first quarter, while France also bettered its performance from this time last year.

London regained its top position with offshore groups, in particular, investors from Hong Kong were the most active offshore buyers in London. In their most active quarter in the British capital since 2014, they pursued offices in the City and West End, all while outspending global funds and all other foreign groups combined by nearly US$1.3 billion. Asian investors, particularly private buyers from Hong Kong and China, have been among the most active in London since the Brexit vote, thanks to sterling depreciation and a slight drop in capital values

Continued demand for portfolios in Germany brought activity to record highs. Elsewhere on the continent, strong performances from France, the Netherlands, Spain, and the Czech Republic all helped boost European volumes past 2016 levels.

Madrid also made its way into the top ten after two large transactions in the retail and hotel sectors. UK based Intu Properties bought the Xanadu mall for over US$560 million while a private Israeli investor bought a 50 percent stake in the Four Seasons Madrid for nearly US$125 million.

European real estate continues to be attractive from a yield perspective, however, pricing concerns could be an issue, with forecast rental growth in 2017 little changed from 2016

Berlin and Stockholm registered robust prime rental growth over the quarter, as supply in both markets contracts on the back of limited speculative development and healthy demand. In London, prime rents were stable during Q1 2017. Nevertheless, the 8.3 percent decline in prime rents since the EU referendum shows the heightened uncertainty in the market. Many corporates are maintain a ‘wait and see’ approach.

You may be interested in Asia Pacific Market Perspective Q2 2017 or Americas Market Perspective Q2 2017

Matthew Richards, Head of EMEA Capital Markets, JLL
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