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CBRE: Real Estate Investment Down By 24% In H1 2016

5 July 2016 – Expansión

The real estate sector is still a preferred investment destination, after a record and unusually active 2015, but investors are now putting the brakes on, which has caused investment volumes to decrease during the first half of 2016.

Between January and June 2016, real estate investment amounted to €3,921 million, 24% less than during the same period in 2015 when, excluding the purchase of Testa, investment stood at €5,200 million. This difference is even more marked if we include Merlin’s purchase of Testa, in which case, investment during the first six months of last year soar to €8,400 million, according to data from the real estate consultancy CBRE.

The decrease in investment reflects a reduction in the supply of real estate properties, the uncertainty at the political and economic level and a normalisation of the quality-price relationship of assets. Despite everything, the level of investment to June was 40% higher than the average recorded over the last ten years.

By sector, the most affected has been the office segment, with a reduction in terms of investment of 48%, to €871 million. Meanwhile, investment in retail and hotel assets fell by 30% and 48%, to €1,341 million and €543 million, respectively. Meanwhile, investment in logistics assets doubled to reach €462 million; that segment now accounts for 12% of total investment.

In terms of type of investor, the Socimis, which accounted for 42% of all real estate investments made last year, have lowered their profiles to participate in just 10% of real estate transactions during H1 2016. By contrast, international funds now account for 68% of total investment. In terms of the geographical origin of the overseas capital, the USA leads the way, with 39% of total investment, followed by Australia (8%) and the UK (6%).

The most important operations during the first six months of the year included: Blackstone’s purchase of 4,500 rental homes for €540 million; Invesco’s acquisition of a portfolio of Gonuri hypermarkets for €358 million; and the purchase of the car park manager Parkia by the Australian fund First State for €300 million. In the office sector, the largest deal was GreenOak’s purchase of the Las Mercedes business park in Madrid for €128.5 million.

Optimistic outlook

Looking ahead towards H2 2016, the President of CBRE España, Adolfo Ramírez-Escuero, acknowledges that the forecasts made at the beginning of the year, that investment would amount to between €8,500 million and €9,000 million in 2016, seem “somewhat optimistic” six months on.

Ramírez-Escudero explained that the result of the UK’s referendum has taken the European real estate sector by surprise. “It is likely that investors will wait until the rules that are going to frame the relationship between the UK and the EU have been defined more clearly, as well as to find out how they will influence the economy on both sides”, said the President of CBRE España regarding Brexit.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake