Covid impact on European real estate hits in Q2 2020
Logistics and residential real estate outperform other sectors as investors seek sustainable revenue streams
In the second quarter of 2020, the total investment volume in European real estate amounted to €43 billion, a 39% drop compared to the same period last year. This is one of the most striking findings to emerge from the latest market analyses by international real estate advisor CBRE. The Q2 figure brings investments in Europe during the first half of 2020 to €129 billion, up 2% from €127 billion for the same period in 2019. In the Netherlands, volume decreased by 23% in Q2 and by 16% in the first half of this year compared to 2019. The decline in the second quarter is less marked than the European average, due partly to a small number of sizeable residential portfolio transactions that took place at the end of the second quarter.
Decline in Q2 after a strong Q1
European property investment volumes fell significantly in Q2, as the full impact of the coronavirus crisis made itself felt. The total volume reached a record high in Q1, thanks to a number of major transactions in Germany, the UK and Scandinavia. As a result, investment volume for the first half of 2020 remained on a par with last year. For continental Europe (excluding the UK and Ireland), investments in the first half of 2020 rose by 6% compared to the same period last year, but were down 34% compared to the second quarter of 2019.
While Q2 investments across Europe fell by an average of 39%, those in Germany, Austria, the Netherlands and Central and Eastern Europe fared considerably better, with more moderate declines of 20%, 17%, 23% and 23% respectively.
The turnaround begins
May was the month in which Europe was hardest hit, a result of the raft of government measures taken to combat the spread of Covid-19 and the significant reduction in transaction activities. June saw a slight increase with the gradual easing of travel restrictions and other measures. Investments in Dutch real estate followed this trend, with volume almost doubling in June compared to May.
“This upward trend in volumes is expected to continue both in the Netherlands and across Europe as the European economy continues to recover. Not only that but there is sufficient capital available on the market and our observations suggest that international investors are showing continued confidence in Dutch real estate.”
Logistics and residential on the up
At sector level, logistics real estate and residential real estate outperformed other sectors as investors went in search of stable revenue streams amid increased economic uncertainty. In the last six months, investment volume in European residential real estate hit €33 billion, a 37% rise compared to the same period last year. Logistics real estate attracted investments of €15 billion in the first half of 2020, up 5% on last year. A stark contrast with the €41 billion invested in office property since the start of the year, down 16% on the first half of 2019.
Logistics real estate and residential real estate are also performing better in the Netherlands compared to other sectors. Investment in residential real estate in the first half of 2020 fell by 21% compared to last year, but remains the biggest sector, with a 46% share of the total property investment volume. Logistics investment increased by over 53% in the first half of 2020, mainly due to a number of large portfolio transactions. Meanwhile investment in office real estate tumbled by 38% compared to last year. Read more about investment in the Dutch real estate market in the first half of 2020.
Rise in retail real estate investment
Retail real estate remains a challenging sector throughout Europe, with volumes down 25% in Q2 2020. However, investment volume increased by 16% for the first half of 2020: the result of a strong first quarter boosted by a number of large portfolio transactions. Another factor in this rise was the lower-than-normal investment volume in retail outlets during the first half of 2019. In the Netherlands, investment volume in retail real estate fell by 53% in Q2 2020, but increased by 2% across the first half of the year. Here, too, the figures reflect a number of large transactions that took place shortly before the outbreak of the Covid-19 pandemic.