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What Drives Variations in Liquidity in Euro CRE Investment Markets? by CBRE
Overall trends in European CRE market liquidity before and after the financial crisis reflect the effects of two key drivers: the availability of debt and the responses of investors to economic uncertainty and risk, according to Peter Damessick, chairman, EMEA Research, CBRE, writing in the latest issue of About Real Estate.
“Total investment turnover in European markets reached exceptionally high levels in 2006-07,” he said, “with liquidity being fueled by a massive expansion in debt finance. Turnover then collapsed in the financial crisis and credit crunch of 2008-09, before staging a partial and uneven recovery over 2010-13, against a background of weak economic performance and restricted bank lending.”
Damessick noted that the uneven recovery in liquidity between 2010 and 2012 reflected strong market polarization in a risk-averse and debt-constrained investment environment. Investment activity was markedly concentrated in the core markets of northern Europe; London and Paris accounted for over 30 percent of all European investment sales in 2012. Meanwhile, the euro-zone sovereign debt crisis drained liquidity from markets on the euro periphery. Total investment turnover in Spain, Portugal and Italy continued on a downward trend over 2010-12. In the year to Q1 2013, total investment sales in these three markets were only 20 percent of the 2007 peak annual total.
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