Following a strong finish to 2012, investment was expected to fall back significantly. However activity in UK, France and Germany increased significantly over 1Q12, CBRE said in a new note. Investment increased 48% in France, 32% in Germany and 8% in the UK. Among countries most affected by the euro crisis Ireland stood out in particular, and has now had two successive quarters of sharply higher investment. Activity in Portugal and Spain also increased and while commercial real estate investment in Italy was up 38% on 4Q12, it was far below 1Q12 levels, even if this was largely due to one particularly big transaction 12 months earlier.

"The improvement in sentiment in Eurozone countries echoes investment trends in other asset classes, where investors have been increasing their exposure to risk for some time," CBRE said. It said though that it is premature to draw too many conclusions from one quarter of activity, especially as the number of transactions in these countries remains low. In terms of asset classes, office accounted for the largest share of European investment at 44% (€12.9bn), but the jump in industrial activity to 13% (€3.7bn), was significantly ahead of its long-term average of around 8%. Retail accounted for just over one-quarter, highest in the UK and Germany.

Jonathan Hull, CBRE Head of EMEA Capital Markets, commented: “With Europe still in recession investors continue to focus on the core markets… There is also some indication that investors are more actively looking at southern European as investors start to seek yield instead of just capital preservation.” CBRE said the increase in first quarter is in line with its Intentions Survey conducted in February. This predated the Italian election, the Cyprus banking crisis and problems with the latest Portuguese budget; however, the financial markets have mostly shrugged off these worries and therefore the real estate market may well follow suit.

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