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‘Beds and Sheds’ Notch Record Share of Investment Deals in Covid-hit Europe for First Time in 2020, while Cross-border Capital Flows Plummet – RCA

Real Capital Analytics / January 29th, 2021

London, January 29, 2020 – Investor spending on apartment and industrial properties combined took a greater value share of European commercial property transactions than offices for the first time last year, buttressing overall deal volume, Real Capital Analytics European Capital Trends 2020 report shows. The pandemic-induced shift to working from home raised questions for investors over the future of offices, and property transactions in the sector fell by more than a third year-on-year. Offices are still, however, the single largest sector by total deal volume.

Total European investment volume fell 27% year-on-year to just under €255 billion in 2020, but deals plummeted 44% to €75.8 billion in the final quarter compared with the market’s all-time peak in the last three months of 2019.

Cross-border capital flows, both intra-regional and from investors in Asia Pacific and North America, retreated across Europe as travel restrictions and social distancing measures hampered the acquisition process. Liquidity in the vast majority of European markets dropped, though as yet pricing has mostly not taken a hit, with yields generally tracking sideways.

Tom Leahy, RCA’s Senior Director of EMEA Analytics, said: “The shift towards ‘beds and sheds’ was one trend plenty had spoken of before March, but the impetus has redoubled in the face of the changes wrought by the Covid-19 pandemic. Apartment and industrial investment accounted for 37% of all European transaction activity by volume in 2020, which is a new record and greater than the amount spent on offices for the first time.” 

Offices investment declined 35% in 2020 compared to 2019 with €94.2 billion of office properties changing hands over the year.

Tom Leahy added: “As yet, demand for core properties seems robust and pricing hasn’t changed substantively, but the real test will be when secondary and tertiary assets come to market.”

As a proportion of total market activity, sales out of distress totaled less than 1.2% in 2020. However, distress tends to lag the onset of the triggering crisis, and RCA expects to see more assets emerge in this fashion in 2021, focused on the sectors most at risk from the fallout of the pandemic – retail and hospitality.

The travel and leisure industry had a torrid year in 2020. Fewer hotels changed hands in 2020 than in any other year in RCA records, but some big hotel deals in the first quarter prevented the worst ever year for overall volumes. The full-year investment total tumbled 65%, with an 84% plunge in the final quarter.

Retail was relegated to fourth place in the overall sector rankings for the first time ever with much of the market appearing to be off-limits for buyers and with little incentive for sellers to test the market. Grocery is the only retail subsector where transaction volume and deal count have increased from 2019. There will be an opportunity to repurpose a significant chunk of the existing built retail stock but, for now, RCA recorded just €700 million of stores bought for conversion or demolition in 2020, equal to 2% of all retail trades in 2020.

Cross-border Capital Flows in Steep Decline

The biggest slowdown in cross-border capital flows last year was from US-based investors, the major source of overseas capital for European markets, with overall transactions down 38% versus 2019 to a seven-year low of €29 billion. Capital flows from Asia headquartered investors, which had been prominent in several countries in Europe prior to the pandemic, fell by a half in 2020. Investment from South Korean investors plunged 78% to €2.7 billion from 2019’s record high level. The only Asian players to have largely maintained 2019 transaction volumes were the Singaporeans with deals totaling €4.3 billion completed in 2020, which is around €1 billion lower than the total for 2019.

Countries with a larger domestic base fared better overall in 2020 than those most dependent on cross-border investors such as Spain, Portugal and Ireland. Portugal was hit hardest by the exodus of US investors, with this cross-border flow plummeting 93%, followed by Spain with  contraction of 79% and Ireland reporting a fall of 45% in US flows.

German investors continue to spend overseas, and even though volumes were down somewhat in 2020, at minus 22%, this is less than the market as a whole. The number one European target was the UK and transaction volumes actually increased versus 2019. Allianz recently spent €447 million buying a 75% share of a Central London office portfolio owned by British Land, augmenting other substantial acquisitions by Patrizia, Union, ECE and Dekabank.

Other highlights from RCA’s ECT 2020 report included:

  • Germany topped the country rankings with investment transactions at €66.7 billion in 2020, a decline of 23% year-on-year. A steeper fall of 49% year-on-year occurred in the fourth quarter. Apartment investments in Germany were the third highest on record in 2020 and down only slightly on the 2019 total, helping the market maintain its number one spot in the European rankings.
  • In the UK, 2020 was the best year ever for apartment investment, with over €11 billion spent on residential for rent and student housing. The numbers were given a boost by the €5 billion-plus sale of the iQ student housing portfolio. Momentum in the UK apartment sector has been growing for some time.
  • Investment deals in the London market totalled €20.5 billion last year, a 24% fall over 2019, relegating the city once again to second place among European markets, behind Paris. London office transaction volumes finished the year at just over €9 billion (£7.9 billion), marking 2020 as the worst year since 2009, when prices were around 50% of current levels.
  • On a global basis, Paris offices remain the number one asset class in 2020, ahead of the office markets in London, Seoul, Tokyo and New York.

The Top Buyers in the European market in 2020 were:

  1. Blackstone
  2. ADO Properties
  3. Aroundtown
  4. SBB i Norden
  5. Union Investment

RCA Europe Capital Trends Webinar Tuesday, February 2nd 9:00 GMT/10:00 CET


Note to editors: 

Real Capital Analytics (RCA) is the authority on the deals, players and trends that drive the commercial real estate investment markets. Covering all markets globally, RCA delivers timely and reliable data with unique insight into market participants, pricing and capital flows. The most active investors, lenders and advisors depend on RCA’s market intelligence to formulate strategy and to source, underwrite and execute deals. An industry pioneer since 2000, RCA has offices in New York, San Jose, London and Singapore. For more information, visit 


Steve Hays, Bellier Financial 

+31 (0)20 419 0901 

Siobhan Crise, Managing Editor, Real Capital Analytics