Investors of European real estate are increasingly setting their sights on Southern Europe, gambling the region’s slow recovery rate in search of higher returns in the future.
According to data from Real Capital Analytics (RCA), a global research firm focused exclusively on commercial real estate data and analytics, investors poured 177.8 billion ($245.3 billion) into Europe in 2013, the highest since 2007. During Q4’13, commercial property purchases in Southern Europe (which consists of Spain, Portugal, Italy and Greece) reached €3.0 billion ($4.1 billion), double the amount from the same year-ago period.
A large deal so far in Q1’14 includes the €61.0 million ($84.0 million) purchase made by a UBS real-estate fund of a shopping center in San Sebastian, Spain, that included 62 stores and 11 restaurants.
Cross-border investors are also taking advantage of the abundance of financially distressed owners and lenders in Greece, the slowest recovering country in Southern Europe.
Opportunistic investors are creating high demands for distressed property loans in Southern Europe. One example is Project Octopus, a portfolio of Spanish loans from Commerzbank AG with a face value of €4.4 billion ($6.1 billion), expected to be one of the biggest such deals in Europe in 2014.
New players to Southern Europe real estate are coming from South Korea, Malaysia and China. Recent deals made by new players include the €280.0 million ($385.4 million) purchase of an iconic Madrid Skyscraper by Chinese developer Dalian Wanda Group, whom purchased the property from Spanish lender Santader, RCA data shows.
RCA data also indicates that sovereign wealth funds are showing increased interest in Europe, purchasing €13.6 billion ($18.7 billion) worth of commercial real estate in 2013, a 31% rise from 2012. Globally, real estate transactions from sovereign wealth funds increased by only 9%.