By Tom Leahy on July 28th, 2016
Concern over Brexit weighed heavily on European investment volume in the first half of 2016, the Q2’16 edition of Europe Capital Trends reveals. European real estate investment declined 26% YOY in Q2’16; for the first six months of the year, the total invested dropped 30% YOY.
A number of global economic, financial and social risks have made investors more cautious about where to deploy capital allocation after a record-breaking year for European real estate in 2015. The build-up to the Brexit vote added to these concerns and was a notable brake on investment in the U.K. While it’s no surprise that Central London was particularly affected, our data indicates that the investment cycle had probably already peaked in the third quarter of 2015 and before the vote was announced.
We appear to be entering a period of consolidation in which the solid fundamentals for investing in European real estate are counterbalanced by a decrease in investors’ risk appetite caused by broader concerns about economic growth prospects and geopolitical risk. The second half of 2016 is likely to see a continuation of the slowdown in transaction volumes in comparison with the strong 2015, but we do not expect market activity to slow to levels seen during the last downturn in 2008-09. The Brexit vote has certainly heightened uncertainty about prospects for the U.K. market, although the weaker pound and continued investor confidence in London’s future has already resulted in some notable deals involving cross-border investors.
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