Investment into European property fell by an estimated 13% for 2007, following a slow second half of the year, according to Jones Lang LaSalle.
According to the firm’s latest research, investment in Europe declined by 25% to E100bn (£74bn) in the second half of 2007. This was the main reason for a final estimated total figure for the year of E220bn (£163bn).
According to Tony Horrell, CEO of European Capital Markets at JLL, this slump is set to continue while a wide-scale price correction, that began towards the end of 2007 moves on through the first half of this year, spreading from the UK across to Europe’s more mature markets.
This will result in investment volumes dropping a further 20% on 2007’s figure in 2008. ‘The sub prime market induced credit crunch of early August came at a time when commercial real estate markets were riding high,’ he said. ‘That said, background concerns about the diminishing risk premia for all property types and the sustainability of yields at record lows were evident.’
He said: ‘The key issue going forward is the health of the overall financial markets and the availability of debt; at the moment there is a discord between the financial and the real estate markets. Real estate fundamentals remain healthy and we think that the economic backdrop in 2008 will be strong enough to generate positive demand in Europe’s occupier markets.’
‘So it really is a case of waiting to see how quickly lenders will come back into the market. Although the equity players, such as sovereign funds and institutions, are still looking to buy real estate, once some of the debt backed investors come back into the market we should see a greater momentum of activity.’