Good news for SpainA total of €25.0 billion was invested in European commercial property in the second quarter of 2013, according to Real Capital Analytics data at the well respected property company of Knight Frank. Although this was 13% down on the previous quarter, it took the total for the first half of the year to €53.7 billion, a 4% increase compared with 2012.

While prime assets in core markets remain a major focus of activity, the first half was also marked by a revival in demand for property in peripheral countries and secondary cities. With a guarded respect with regard to the Eurozone debt crisis easing, increased numbers of investors have been looking for opportunities outside of core markets as they move up the risk curve in the search for higher yields.

The three largest European markets; the UK, Germany and France, collectively accounted for 64% of total investment activity in the first half of the year. On a year-on-year basis, investment volumes for this period were up in Germany (+24%) and the UK (+11%), but fell in France (-20%). London and Paris have remained key targets for international investors entering Europe, but transactional activity slowed in the French capital during the first half of 2013.

Year-on-year, investment volumes increased significantly in Spain (+102%), Italy (+113%) and Ireland (+182%), albeit all three countries were recovering from low levels of activity in 2012. Significantly, the Spanish investment volume of €1.1 billion included AXA’s purchase of a portfolio of offices in Barcelona for €172 million. This was AXA’s first acquisition in Spain since the onset of the financial crisis and provided evidence that international institutional investors are now returning to the Spanish market after being largely absent in recent years.

Investment volumes in Italy were boosted by the Qatar Investment Authority’s acquisition of a 40% stake in Porta Nuova in Milan, a major urban regeneration project valued at over €2 billion. This was one of several major deals at the front end of this year involving Middle Eastern or Asian buyers. Having been largely focused on the London and Paris markets in recent years, investors from these regions are now taking stakes in landmark schemes in other European capitals and stronger regional cities. Notably, the Chinese sovereign wealth fund Gingko Tree Investment acquired a share in the Co-op headquarters in Manchester, United Kingdom in the first quarter, whilst an undisclosed Asian investor was part of a joint venture that agreed to purchase the BelAir project in Brussels in the second quarter.

For 2013 as a whole, European investment volumes remain on course to reach and go beyond a similar level to 2012’s total of €118.7 billion. Europe’s gradual emergence from its long recession can be expected to continue to aid sentiment and boost investors’ risk appetite. Activity in peripheral countries should also be encouraged by the stabilisation of yields in these markets, following recent downward price corrections. This all bodes well for Spain’s emergence from its previous difficult years. The need now is to continue to encourage the interest shown by the major investment factors around the globe and get the country back to a healthy standing.


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