RCA Insights

Q3 2016 Europe Capital Trends: A Slowing Core

By on October 27th, 2016

European investment volumes continued to fall in Q3’16, the new edition of Europe Capital Trends shows. Volume dropped by 38%, marking the third consecutive quarter of year-over-year declines. Hurt by Brexit concerns, quarterly volume in the U.K. fell behind German volume for the first time since 2012.

While the year-over-year decline looks severe, it should be noted that Q3’15 was the strongest third quarter of European investment activity RCA has recorded and that the Q3’16 level is in line with the 10-year average.

The slowdown in investment volumes has been concentrated in Europe’s three core markets – the U.K., France and Germany. The U.K. saw a notable slowdown, partly in reaction to the June vote to exit the European Union. In contrast, Spain, the Netherlands, Sweden and Finland recorded higher investment volumes for the first three quarters of 2016 versus the same period in 2015. In the context of a 29% year-to-date aggregate drop across Europe this is a significant outperformance.

1610-ectq3-main_v2-01The trend of growth occurring outside the core markets is even more prominent when looking at investment at the market level. Investors are being forced to work harder to source stock, and capital is spreading into smaller markets such as The Hague, Utrecht, Leipzig and Liverpool. Furthermore, movements in yields show investors are also placing more capital at the secondary and tertiary end of the commercial property market.

The hotel sector was one bright spot in Europe, with Q3’16 investment volumes well above the long-term average. In Germany investment volumes in the hotel sector for the first nine months of 2016 were at a record.

If you are a current RCA subscriber log into your account to download the Q3’16 edition.

Tom Leahy

Tom Leahy

Senior Director, EMEA Analytics

Tom Leahy joined RCA in 2014. In his role as Senior Director for the EMEA region, Tom is responsible for the development and expansion of the market analytics service for RCA’s European clients.

Prior to joining RCA, Tom was an Associate Director and then Head of Research at UK-based property consultancy, Lambert Smith Hampton. He started his career as an analyst at research consultancy Property Market Analysis (PMA).