European commercial property investment came to €43.3bn in Q2 2017, according to Knight Frank, while transaction volumes for the first half of the year amounted to €90.3bn, representing an 8% decrease year-on-year.
Although overall European investment volumes were down year-on-year in Q2, sentiment remained buoyant in many key markets the firm reported. Germany has become the leading European investment destination for North American investors and the dominant location for intra-European cross-border investment.
The investment markets of Spain and the Netherlands were also buoyant throughout H1, with investors attracted by strengthening rental growth prospects. Conversely, investment volumes in the UK remained well below the levels seen prior to last year’s Brexit vote, despite an increased volume of Asian capital flowing into the London market.
European prime yield compression showed no signs of abating in Q2, with prime office yields hardening in markets including Amsterdam, Brussels, Milan and Vienna. Prime yields also continued to fall in the major German office markets, and are now over 100 basis points below previous record cyclical lows in Berlin, Frankfurt, Hamburg and Munich. The Knight Frank European Weighted Average Prime Office Yield hardened by nine basis points over the quarter to a new low of 4.35%.