European commercial property markets set to hit eight year high

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Dublin-IFSC-Commercial-PropertyActivity in Europe’s commercial property markets is at its highest level since 2007, according to a new report from Knight Frank. Transaction volumes hit €104.9 billion in the first half of 2015, an increase of nearly a third on the previous year, while investment for the whole of 2015 is forecast to exceed €230 billion. The study claims that these increases are being felt in local markets across Europe, with the two largest markets in the UK and Germany performing especially strongly, accounting for around a half of total investment. There were also major improvements in levels of investment Italy and Portugal as well as more activity in both Spain and Ireland (above). However, the report concedes that rental growth remain ‘patchy’ across the continent but forecasts that this will improve as pressure grows on the availability of space in major cities like Paris.

The report suggests that the increased levels of investment are driven primarily by continuing strong demand from overseas investors, especially those from the US. This demand will continue during the second half of this year and should see the market up around 20 percent on 2014.

‘Investment volumes continue to be driven upwards by the strong international demand for European commercial property, particularly from US investors, and by the increasing number of large portfolio deals,’ said Andrew Sim, head of European Capital Markets at Knight Frank. ‘These trends are expected to continue over the rest of the year, and we forecast that annual European investment in 2015 will be more than 20 percent up on 2014. European transaction volumes are approaching the levels seen at the market peak of 2007, and several countries may well set new records this year.’