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Europe and Asia lead way in commercial property boom

Inflows into commercial property rose by 333 per cent in 2006, reaching a record high of £338bn as investors piled into the asset class.

Europe and Asia were the biggest areas of growth in commercial property investments, with volumes rising by 50 and 48 per cent respectively.

The results see Europe take over from the US as the dominant property market, accounting for 46 per cent of global activity while the US dropped to 39 per cent from 46 per cent in 2005.

The report, which was carried out by global real-estate consultant Cushman and Wakefield, also highlights Europe as the strongest area for cross-border investment, with almost half of the deals in Europe conducted by dealers in other countries.

Cross-border investment now totals 29 per cent of the total investment market, up from 25 per cent in 2005, with the group expecting further rises in 2007 as diversification of property investments continues to grow.

Europe also accounted for six of the top 10 global investment markets, with Poland and Russia driving Central and Eastern European returns up from 1.1 per cent of total market activity in 2001 to 5.5 per cent in 2006.

Turkey and Romania were also strong while Germany was the most popular market, with volumes trebling in the past 12 months.

BestInvest head of communications Justin Modray says: “It is no surprise that commercial property was this strong once again in 2006 as capital growth has skyrocketed while rental income has remained strong.

“Next year’s results will be more interesting as capital growth slows and yields drop, meaning the big challenge for property managers will be getting a higher rental income stream.”


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