One of the most significant changes in the structure of the European commercial real estate market over the last two years has been the withdrawal of US buyers from the market since the credit crunch took hold, according to new research from CB Richard Ellis.
Two years ago, at the peak of the market, US investors were the largest single player in the European commercial property market, making over €20 billion of acquisitions in the first half of 2007 alone. Although they were also active traders and generated over €9.5 billion in sales in H1 2007, this still made them very substantial net buyers in Europe. American investors are now virtually absent from the European real estate market, with total acquisitions of just €400 million in H1 2009. This withdrawal from the market has not, so far, resulted in substantial sales, although €700 million of disposals in H1 2009 did make them net sellers for the first time in several years.
The market on which this withdrawal has had the greatest impact has been Germany. The peak of US interest in the European market coincided with a period when both the German Open-ended property funds and German corporates were active sellers. The large portfolios that they were selling proved attractive to US buyers and as a result Germany was the destination for nearly half of all US investment into Europe between 2006 and 2009, a total of €36 billion. The UK and France were also active destinations for US investors – these three countries together received 84% of the US investment in European commercial property over that period. US investors were also at the forefront of investment into German residential property which also boomed over the same period.
Ray Torto, CBRE’s Global Chief Economist, said: “US investors are not only absent in the European market but also in the US market. American buyers, correctly so, have been convinced in the last year that there were lower prices ahead.”
“Looking forward, there are signs that US investors will start to become more active in Europe in the fairly near future. US opportunity funds that are currently raising capital are increasingly identifying Europe as a potential investment target and substantial amounts that have been raised in the recent past have yet to be invested,” concluded Torto.