Real estate investment across Europe reached record levels at E116b (E78bn) for the first half of this year, according to the latest provisional research published today by Jones Lang LaSalle.

This represents a 4% rise on the same period last year. It said, the market continued to be dominated by the largest three markets of the UK, Germany and France, which together accounted for over two thirds of investment activity in the first half of the year.

Unlisted funds, including third party managed funds, remain the most active players in the market.

Tony Horrell, chief executive officer of European capital markets at Jones Lang LaSalle said: ‘As investors continue in their search for yield and value, increasing activity is evident in Europe’s smaller markets such as Finland and the emerging markets of Eastern Europe.’

He said: ‘Over the second half of the year we envisage no tailing off in investor demand across Europe as a whole, but with perhaps a shift from the UK to the continent. With finance rates rising towards 5% in the Eurozone, positive yield spreads for prime real estate have disappeared in many markets and further interest rate rises are expected in the UK and Eurozone.’

‘However, whilst this will make leveraged investors less competitive, there are many other investors to fill the space. Indirect funds are still raising equity and have significant volumes of capital to invest. Pension funds and institutions are up-weighting, plus more international sources of capital such as China, Japan and the Middle East, as well as sovereign funds, are expected to enter the market.’