European Real Estate Snapshot

A monthly in-depth coverage of the latest developments in the European Real Estate market.


September 2018

Markets Overview

Fundamentals by Asset Type Office

Leasing momentum strongest in Spain, Netherlands and Italy. Germany, UK and France are seeing slower growth.

Flexible office space is rapidly permeating the European markets. Flexible office operators accounted for about 14% of office take-up in London in 2017.

Technology sector is ahead of financial and business services with respect to occupier demand across Europe.


Recent trend towards micro-apartments is expected to continue.

'Micro-apartments' are fast becoming a desirable way to live across Europe.

Multi-family sector is expected to increasingly incorporate hospitality elements. Consequently, service charges will form a larger proportion of total occupancy costs.

Lack of purpose-built care homes and assisted living housing for the elderly

Key challenges in this sector are (i) unsupportive legislation to increase density in historical cities across Europe and (ii) strongly regulated social and middle-income housing

Industrial and Logistics

E-commerce is the largest demand generator. In comparison to conventional sale, the handling of an online sale requires around 3x more space.

In the UK, one-third of all logistics take-up is accounted to online sales. Germany, France and other key markets are quickly catching up to this trend.

Concept of ‘pop-up warehouses’ or ‘on-demand warehouses’ is expected to become popular where owners of excess warehouse spaces are matched with users who need it temporarily.

Logistics sector is closing the rental yield gap with the office sector.


In contrast to shopping centres in the US, where main issue facing landlords is overprovision of space (around 5x more than in the next closest European country), shopping centres in Europe are still expanding.

Brick and Mortar stores are turning their focus on the shopping experience and accessibility for the elderly as they are still out of e-commerce target market.


Premium pricing and shortage of stock in the main European gateway cities continue to prompt investors to look at investment opportunities in southern and eastern European markets.

Data Centres

London and Amsterdam are the European data centre hotspots with a market share of 37% and 22% respectively; followed by Frankfurt at 21%, Paris at 13% and Dublin at 7%.

Frankfurt, London and Amsterdam are expected to provide the new supply in 2018. Beyond 2018, subdued growth is expected until 2021. The operators remain cautious of oversupply that might cause an imbalance in pricing

Focus of the Month

German Property Market

The German property prices may seem like a bubble, but many investors, both foreign and domestic are showing a great deal of confidence in what they consider to be a stable market. A number of global and economic factors make the German property market attractive, with major activity being concentrated in top cities: Frankfurt, Berlin and Hamburg, due to growing needs of people, increasing population and businesses migrating to these cities. The lending space is competitive, and German lenders are looking to widen their offerings across borders. Property prices have reached their peak and investors are now seeking returns through rental growth

Global and Economic Factors

International events and German economic policies are attracting investments into the country.

Germany serves as a safe haven for capital among fears of a global trade war and greater political uncertainty in parts of Europe.

London remains a top attraction for overseas investors, but growing uncertainty over UK’s decision to leave the EU and a stamp duty increases for UK property have worked in favour of Germany.

There is no capital gains tax on properties owned for over 10 years in Germany. This combined with a strong rental market attracts capital to German real estate.

Banks and Lending

The debt landscape offers great competition and margins remain low.

German Banks are scouting for the best deals, and have increased their business to foreign markets to capture higher margins. Lenders are also targeting investors who are buying properties which are not core assets.

The competition among pfandbrief banks have kept the senior lending margins low, to below 100 bps.

Yields and Prices

Price stabilisation implies that investors should look for returns through rental growth.

Rental yields have reached a floor in Germany, especially for core real estate, indicating that prices have stabilised. Prime assets have reached the peak price levels in the property cycle, with the average yields across major cities around 3.24%.

Yield compression can be found in properties which are not so ‘prime’, but located in popular locations. The gap between yield on prime and non-prime offices in the same areas has reduced to mere 76 bps.

Top Deals

Office dominates and the alternative sectors are growing rapidly as well.

Office deals were most prevalent in H1 2018, 10 properties valued between €250 million and €500 million changed hands.

Logistics halls in high demand and German banks are capitalising on foreign logistics demand.

Investment in alternative sectors was up as well with large healthcare and hotel deals in the past quarter

Funds in the Market

Recent Fund Activity Capital Raising goes East

There has been a continuous increase in the multi-region fund raising activity given the rise in interest from the Asian investors in funds focussed in European investments. The share of multi-region fundraising has doubled to 32% in H1’18 since 2010.

The investments in Asia-Pacific funds have also increased from 11% in 2010 to 20% in H1’18 given a rise in interest from Asian LPs in the asset class.

Capital raised from Europe peaked in FY’14, but has since declined to 19% in H1’18 owing to a rise in participation from the foreign investors in the region.

Shift in Strategy

It is widely accepted that 2015 was the fundraising zenith for real estate equity funds. For the current year, value-added and opportunistic funds accounted for nearly half of fund closures and capital raised.

Fundraising for value-add funds in H1’18 was at the lowest level since 2013 for any H1, while opportunistic was the most popular strategy, confirming an increase in investor’s risk appetite.

Overall, investors have placed a greater emphasis on debt strategies to maintain allocations to the real estate, due to the potential risks associated with the current late stages of the property cycles

Strategy Institution Regional Focus Asset Focus Status Fund Size
Value Added NREP Western Europe Mixed Raising € 903 m
Value Added Europa Capital pan-Europe Diversified Final Close € 716 m
Mezz/Debt Brunswick Real Estate Western Europe Diversified Raising € 640 m
Core Real I.S. pan-Europe Mixed Final Close € 600 m
Mezz/Debt Laxfield Group Western Europe Diversified Raising € 500 m

Recent Transactions

Snapshot of Key Deals Direct Acquisition
Asset Name Buyer Seller Asset Type Location Price
Capital 8 Invesco Real Estate Rodamco Westfield Office Paris € 789 m
8 Gallery Pradera & AXA IM GWM Funds Retail Turin € 105 m
Athene Place Henderson Park Commerz Real Office London € 114 m
Portfolio of 6 assets DWS Multiple sellers Logistics pan-France € 92 m
Amstel Building Barings Real Estate Chromwell Property Office Amsterdam € 100 m
Property Financing
Asset Name Lender Borrower Asset Type Location Loan Amt.
St Katharine Docks Allianz Real Estate, Brookfield Blackstone Commercial London € 333 m
Gallagher Retail Park pbb Deutsche Pfandbriefbank Hana Financials Retail West Midlands € 119 m
Milton Park Barings Real Estate Hermes & CPPIB Office Oxfordshire € 222 m
Logistics portfolio Aareal Bank Apollo Global Logistics Logistics € 800 m
General Purpose Relationship Banks, led by BNP Paribas AccorHotels Hotel Paris € 1200 m
Key Indices
Key Indices 31-08-2018 YTD 1-YEAR 3-YEAR 5-YEAR
MSCI World Real Estate 209.49 (1.3%) 2.3% 14.3% 7.8%
STOXX Global 1800 Real Estate 260.23 (0.8%) 2.4% 13.6% 8.1%
STOXX Europe 600 Real Estate 180.28 (0.3)% 6.7% (7.1%) 44.9%
Dow Jones US Real Estate 328.87 2.2% 0.1% 16.7% 13.8%
STOXX APAC 600 Real Estate 240.45 (4.3%) 3.6% 14.8% (6.4%)
European REITs
Property REITS - Europe 31-08-2018 YTD 1-YEAR 3-YEAR 5-YEAR
Retail 76.27 (17.8%) 2.6% (15.3%) 23.3%
Office & Industrial 260.23 (0.8%) 2.4% 13.6% 8.1%
North American REITs
Property REITS - US 31-08-2018 YTD 1-YEAR 3-YEAR 5-YEAR
Retail 468.59 1.1% 11.2% (17.9%) 26.0%
Office 348.37 (1.9%) 3.4% 12.7% 6.0%
Healthcare 168.2 4.2% (9.8%) 12.1% (1.3%)
Industrial 359.41 5.2% (1.4%) 71.3% 10.7%
Diversified 233.67 0.2% (0.8%) 42.6% 7.3%


This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material is not financial research and was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and Oxane Partners has no obligation to provide any updates.

This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. The information contained in this presentation is not intended to be used as a general guide to investing, or as a source of any specific investment recommendation.Views and opinions expressed are for informational purposes only and do not constitute a recommendation by Oxane Partners to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.Sources: PERE, Real Estate Capital, Gulf News, South China Morning Post, Savills, Knight Frank, Deloitte, JLL, Institutional Real Estate, Bloomberg, propertyfundsworld, Colliers International, PwC