February 4, 2015 / 12:05 AM / 5 years ago

Europe's commercial property market hottest since 2007 - report

LONDON, Feb 4 (Reuters) - Europe’s commercial property market sizzled last year, as demand for real estate in Paris, buoyant second-tier British and German markets and strong private equity interest in Ireland and Spain sent deals to their highest level since the financial crisis.

Europe saw 213.1 billion euros ($241.7 billion) of commercial real estate transactions in 2014, a rise of 13 percent over 2013, according to a report by research firm Real Capital Analytics (RCA) released on Wednesday.

Investor enthusiasm for safe haven Paris led France as a whole to a 31 percent rise in investment volumes. The capital attracted 74 cents of each euro invested in French commercial property market.

“Political and economic uncertainty in France deterred investors in 2012 and 2013, leaving assets in Paris attractively priced relative to the other core investment markets of western Europe,” said Tom Leahy, RCA’s director of EMEA analytics.

Overall investment in London slipped 3 percent as high prices led investors to British regional markets such as Manchester, Leeds and Glasgow. Commercial property sales across Britain rose 16 percent despite the London decline.

A similar trend emerged in Germany, where volumes in Berlin, Munich and Hamburg fell, while second-tier markets in the Ruhr Valley, Cologne and Stuttgart strengthened.

Most improved were commercial property markets in Ireland and Spain, where investment volumes soared 89 percent and 134 percent respectively.

Private equity funds bought into the areas as banks reduced their property exposure, while both countries introduced modified rules on tax-exempt real estate investment trusts (REITs) that saw new domestic companies competing for assets.

Domestic investors only accounted for around 53 percent of purchases by value last year, RCA said, with global investors at their busiest since 2007.

Funds advised by U.S.-headquartered Blackstone Group accounted for 5.3 billion euros of recorded transactions for the year, making it the region’s most active buyer.

Russian transactions dropped 48 percent by volume, while investment from China fell 27 percent as the United States became the primary target for deploying capital, RCA said.

Prospects for the market look good in 2015 following the European Central Bank’s January decision to pump hundreds of billions of stimulus money into the region’s economy, said Simon Mallinson, RCA’s managing director for Europe, the Middle East and Africa.

“Quantitative easing will lower interest rates for an extended period of time to support real estate investment in the euro zone, while the weaker euro may attract more international investors to buy assets,” he said.

$1 = 0.8817 euros Editing by Mark Potter

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