Paris knocks London off top of European property investment list

Paris has overtaken London to become the number one city in Europe for property investment while Moscow has overtaken Berlin as the number six city, according to global property adviser CBRE.

With the onset of the financial crisis in the third quarter of 2008 foreign investors largely abandoned Russia and have not yet returned in significant numbers. Domestic investors account for the majority of commercial real estate investment in Russia.
But according to Christopher Peters, director of research at CBRE in Russia once foreign investors recover their appetite for Russia her place in this table will rise further.

The Russian real estate investment market as a whole recorded €1.684 billion of activity in the fourth quarter of 2011. Together with the second quarter of 2011 with investment of €1.790 billion, these were the highest quarterly volumes seen in real estate investment since before the onset of the financial crisis.

A surge in investment activity in the final quarter of 2011 meant that investment in Paris jumped from €3.6 billion in the first half of the year to €7.9 billion in the second half, resulting in the first change in the top two of the rankings since CBRE began compiling the list in 2004.

But investment in central London in the second half of 2011 was far from subdued at €7.8 billion. Although failing to match the very high total recorded in the second half of 2010.

The French real estate investment market as a whole recorded €6.5 billion of activity in the final quarter of 2011. This was the highest quarterly turnover for France since the third quarter of 2007 and was ahead of every other market in Europe during the final quarter of 2011 except the UK, which saw an estimated €8.3 billion of investment activity.

Investment activity in France was heavily biased towards the Paris office sector and included large portfolio and single asset deals.
‘Investor sentiment in Europe has been heavily influenced by the sovereign credit rating downgrades and the lack of a solution to the Eurozone crisis. This has driven European investment activity towards the Nordic markets and German cities in particular,’ said Jonathan Hull, EMEA head of capital markets at CBRE.

‘Despite this trend, the Paris and Central London markets remain central to Europe’s investment market and the degree of foreign investment from outside of Europe is testament to the enduring attractiveness key cities,’ he added.

The other European markets in CBRE’s top 10 closely match the economic trends that have been seen across Europe recently. Three German, Munich, Frankfurt and Berlin, features, reflecting the strong economic growth that has been seen in Germany over the last couple of years. Another German city, Hamburg, was in eleventh place on CBRE’s list.

The Nordic region also outperformed in terms of economic growth, with three cities, Stockholm, Oslo and Copenhagen, featuring in the top 10 as Scandinavian investment and that from elsewhere in Europe increased significantly, while investors from Australia and Canada were also prominent.

Strong investor interest in the Central and Eastern European (CEE) region has resulted in both Moscow and Warsaw featuring in the top 10, as was also the case in the first half of 2011.

Direct commercial real estate investment in Europe in the second half of2011 reached €62.9 billion, just shy of the €63.1 billion that was transacted in the second half of 2010, but 14% up on the first half of the year.
Total investment activity in Europe reached €118 billion in 2011, a 7% increase on 2010, with a pick up in cross border activity accounting for 41% of the market in the second half of the year compared with the first half.