Fall in Commercial Investment Due to Lack Clarity on Eurozone

Weakening economic outlook and uncertainty surrounding the future of Eurozone has led to declining commercial investment in the first half of the year.

According to a Knight and Frank report, commercial transaction volume across Europe fell by 19.4 percent from last year. The total transaction volume in the commercial sector amounted to approximately $60 billion.

Darren Yates, partner in Knight Frank’s research team, said in a statement: “Investors are clearly concerned about the possibility of a Eurozone break-up and the recent sharp fall in activity in the peripheral markets reflects this. That said, with property continuing to offer a significant premium over bond yields, the case for investing in real estate remains strong, particularly in the better performing economies - both inside and outside the Eurozone.”

Meanwhile, the report shows that despite an overall drop in transaction volume several countries have managed to attract investors. Germany, the Nordics and cities such as London and Paris saw increased investment from especially high net worth individuals. However, Italy, Spain, Portugal and Greece saw low investment volume, primarily due to concerns of a possible break-up of the euro area, the report said.

On core markets, especially London, remaining upbeat, Andrew Sim, Knight Frank’s head of European investment, said in a statement: “Despite continued worrying levels of tenant ‘inactivity’, we have even seen prime yields harden under the ever-increasing flow of international capital. However, core product is scarce and this lack of product has encouraged some to widen their investment horizons and even take on a ‘little risk’ for an appropriate discount. We believe this ripple is set to continue, with investors gently drifting towards more added value opportunities in the strongest markets, with a positive increase in core activity in the tougher European economies.”