CBRE: Investments in European CRE Flowing from North America
Carl Gaines March 5, 2012, 11:35 a.m.
The European commercial real estate market is being dominated by U.S. and Canadian investors, with several New York-based asset managers pursuing routes into real estate—like debt portfolios—that others pass by.
According to data from CBRE, North American investors were responsible for 30 percent of investments in European commercial real estate last year. This was up from 21 percent in 2010. Of this capital in 2011, €9 billion was from the U.S. and €2 billion was from Canada.
Michael Haddock, a London-based senior director, EMEA Research and Consulting, at CBRE said that investors tiptoe around the countries there hardest hit by the European debt crisis. He said that the general trend is investors looking for core real estate in core markets and avoiding the risk associated with distressed assets. “But there is small group of investors,” he pointed out, “who do actively seek out risk in the hope of getting very good returns.” Part of this is due to a different mindset, Mr. Haddock pointed out.
“With somebody like Blackstone, it’s quite interesting that they’re pursuing quite a number of different routes into real estate—so Blackstone has been quite prominent as buyers of debt portfolios, as well as direct real estate,” he said. “That’s reasonably typical of US investors. That they have the ability to think in multiple dimensions about ways markets operate.”
Blackstone Real Estate Debt Strategies, a division started in 2008, currently has $4 billion of assets under management, according to the company, whose total real estate assets under management as of December 31, 2011, were $42.9 billion.
The increase in non-European buyers of European commercial real estate caused a 7 percent increase in overall investment activity in the market. It rose from €110 billion in 2010 to €118 billion in 2011.
After the UK the next most popular market for North American investors was Germany, Mr. Haddock said. “That has certainly been the case for the last couple of years,” he added. “Next largest—pretty much equally for last year—were France and Russia. And then it trails off pretty quickly after that.” To that point, the CBRE data showed only about €350 million in Italy, €170 million in Spain and nothing Mr. Haddock could see in Portugal, Ireland or Greece—among the weakest of the Euro zone markets.
Though the investment activity was spread across markets in countries least impacted by economic turmoil, the London office market fared the best. Central London took 18 percent of total North American capital invested in Europe in 2011.