Commercial real estate investment in Europe falls by 23%

By

Matthieu Guinebault

Translated by
Nicola Mira

Published
Nov 17, 2016

As the Eurozone's economic recovery is dragging its feet, Europe's commercial real estate market was worth €60 billion in the last twelve months. According to an analysis by BNP Paribas Real Estate, published for the MAPIC commercial real estate trade show, half of that figure came from Germany, the UK and France combined.

Last year's record of €70 billion in commercial real estate investment has not been topped. The last twelve months posted a 23% downturn, for a figure consistent with those of the last few years. Another factor to be taken into account is that, by themselves, a series of high-calibre projects have caused the investment recorded in Ireland to triple, and that in Poland to double. 

"Faced with poor returns on the leading European markets, investors keep seeking locations offering a higher performance, underlined BNP Paribas Real Estate. The returns of prime commercial assets on the main European markets remain under pressure. In Spain they have dropped significantly since 2014, having been high for a number of years," said BNP Paribas analysts.

In addition, there is a persistent disparity in prime rental costs. London and Paris are a cut above the rest: their rents are the most expensive, as prices in the former have quadrupled in ten years, and have tripled in the latter. Cities like Zurich and Berlin are instead now regarded as being less expensive alternatives. However, according to Fiona Hamilton, BNP Paribas' global head of retail for international brands, the market is looking at a new boom, after the online sales explosion.

"Retailers are reviewing their online strategy and are considering brick-and-mortar shops as their best assets," she explained. "The evolution of e-commerce is going hand in hand with a return to traditional stores. (...) Retailers need to create a special environment. The business model based exclusively on online sales has reached its limits, and this is great news for commercial property."