European real estate investment is continuing to fall on reduced debt funding and concerns about slowing growth, according to new data from Real Capital Analytics. In a report released today the New York based researcher said that real estate investment in Q1 2012 fell to the lowest level in 18 months. According to the report sales of commercial real estate, hotels, development sites and apartment blocks fell to 28.4 billion Euros, down 28 percent from a year earlier and the lowest since Q3 2010.
"Continued sensitivity to risk among active investors and a severely constrained debt market have hampered investment activity across almost every market," Joseph Kelly, RCA’s director of market analysis in Europe, said in an interview.
While transactions fell in both Germany and the UK, by 33% and 23% respectively in Europe's two biggest investment markets, investment volumes in France actually increased by 9%. On a sector by sector basis only land sales and multi-family housing broke the depression, with the latter helped by the 1.4 billion-Euro purchase of 21,000 apartments by a group including Patrizia AG. Offices, retail properties, industrial properties and hotels all saw declining sales according to RCA.
It is a decline that looks unlikely to end any time soon as banks are coming under more and more pressure to tidy up their balance sheets, and face increasing regulation to prevent future shocks, including rules specifically aimed at commercial real estate lending.
Morgan Stanley predicts European bank lending on commercial real estate will fall by as much as 700 billion Euros over the next 3-5 years as a result of increasing regulation, limited growth and reduced appetite for risk.
- Friday 04 May 2012