Europe is the most exposed global region to cross border property and since 2007 inflows from outside Europe have accounted for 18% of all investment activity.
The report points out that the proportion of cross border investment coming from outside Europe has increased markedly in recent years with capital from Asian investors and more recently from North America entering the European market in increasing amounts.
Cross regional capital, that which comes into the European market from other parts of the world, and intra regional capital which is cross border investment, but from inside Europe, re roughly equal in terms of total value of transactions executed, each making up just over 20% of total buying activity in Europe recently.
However, the report points out that these two different types of cross border investor tend to invest in very different types of property and, to an extent, in different locations too.
In the first half of 2013 domestic investors in Europe were highly concentrated in smaller transactions, with an average transaction size of €21 million. Cross border investors from other parts of Europe targeted larger lot sizes, averaging €42 million per transaction. However, those from outside Europe entirely invested in still larger lot sizes, with an average deal size of €94 million. Of the 35 UK transactions in the first half of 2013 with a lot size of £100 million or more, 22 were bought, either in whole or in part, by an investor from outside Europe.
The report also said that there is also very narrow distribution of cross regional capital, with the top10 cities accounting for 60% of global investment into European commercial real estate from 2012 to the first half of 2013.London, Paris and the main German cities take a very high proportion of the total due to the transparency, overall liquidity and a steady flow of the right type of investment opportunities available in these markets.
Cross regional investors from different continents also appear to have different characteristics in terms of the countries they invest in and the type of properties they buy.
Investment from North America into Europe has tended to come in the form of collective investment vehicles. These funds often invest on behalf of institutions, but are more likely to use leverage and appear to be more focused on returns than diversification. They have typically invested in a wider range of locations than other cross regional investors and have been more likely to look at value add and opportunistic acquisitions. Investors from North America have shown a strong bias towards Germany compared to other cross regional investors.
Buyers from the Middle East are more diverse in nature, with a variety of institutional, mostly sovereign wealth funds, and...
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