A report from real estate analysts Real Capital Analytics shows that while investment in European commercial real estate slowed in the first half of 2018, both the Netherlands and Ireland bucked the trend, with a 17% increase in the value of transactions in Holland and a huge 84% here at home.
High prices were among the factors that led investors, including sovereign wealth funds and US institutions, to scale back their direct property acquisitions across Europe, with an average decline in transaction value of 19% compared to the first half of 2017.
Fourteen out of 20 national markets were affected, with the most active players, Germany and the UK, down by 31% and 11% in the first half. The pair accounted for 48% of total investment activity in Europe.
Senior director of EMEA analytics Tom Leahy said: “These are the weakest investment levels by sovereign wealth funds since 2010 and they were not alone. RCA’s data for the first half show that most major sources of capital were less active and U.S.-headquartered investors as a group were net-sellers. Our indicators show that pricing in the core Western European markets is well above the previous peak, reached in 2007.”
The Netherlands, which lagged behind other markets in its recovery from the crash of 2008 and the eurozone crisis, continued to attract strong investment following a record year in 2017. It was Europe’s fourth most active market in the first half of 2018, with €9.8 billion of transactions, a 17% increase from the same period in 2017.
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Ireland’s market grew 84% to €2.5 billion in the first half, following a surge in purchases of rental apartment blocks in Dublin. The largest of these deals was AXA’s €161m purchase of The Grange (pictured) and four acres of adjacent development land in Sandyford, through its joint venture with Kennedy Wilson.
Leahy's view is that housing supply in Dublin is not keeping pace with population growth as multinational companies locate to Ireland, bringing high quality jobs. The largest single property deal in Dublin was Google parent Alphabet’s forward purchase of a new office complex to be developed at Boland's Quay for an estimated €300m.
Other active European markets include Lisbon, which jumped to 13th place from 53rd in 2017 as a result of some large deals, including Blackstone’s portfolio sale of a retail park and two shopping centres for more than €400m.
