Current and recent trends in international investment across Europe

1. Investment Market Update
International investment in Europe
Rise of non-European capital
DTZ Research
11 March 2014
Contents
Regional trends 2
Sources of Capital 3
Property type 4
Investor Type 5
Target Geography 5
Outlook 5
Authors
Karl Kelly
Analyst
+44 (0)20 2396 2314
karl.kelly@dtz.com
Nigel Almond
Head of Strategy Research
+44 (0)20 3296 2328
nigel.almond@dtz.com
Contacts
Magali Marton
Head of CEMEA Research
+33 (0)1 4964 4954
magali.marton@dtz.com
Hans Vrensen
Global Head of Research
+44 (0)20 3296 2159
hans.vrensen@dtz.com
 Investment into Europe from non-European investors totalled EUR36bn in
2013, representing a record 26% share of total volumes. However, in absolute
terms it was still below the EUR46bn recorded in 2007.
 Non-European investors have been the only investor group who have
consistently been net investors in each of the last five years highlighting their
importance. Domestic and Europeans were net sellers over this period.
 North American and Global funds remain major investors but they were also
significant sellers. Asian and Middle Eastern funds, from Singapore, China,
Kuwait and UAE, were the main investors into Europe during 2013.
 Offices remain the most popular sector for non-European investors, with EUR
60.1bn being invested since 2009. The UK accounts for 67% (EUR40.1bn) of this
activity, led by significant activity in London.
 London remains the favourite city for non-European investors, accounting for
40% of total non-European investment since 2009. This is followed by Paris at
5%.
 DTZ Research projects non-European investors to increase their investment
into Europe over the next two years, both taking total volumes to 2007 levels
and increasing their overall share towards 30%.
Figure 1
European investment by capital source 2004-2015, EUR bn
0%
5%
10%
15%
20%
25%
30%
0
50
100
150
200
250
Domestic European
Non-European % Non-European
Source: DTZ Research

2. International investment in Europe
www.dtz.com Investment Market Update 2
Regional trends
Growth in non-European investment
Total investment in European commercial real estate
reached EUR139bn in 2013, more than double 2009’s low of
EUR62bn. Investor confidence has once again returned to
the region, as prospects about the economy are improving
and political uncertainty over its future is declining.
Investment volumes are being driven by flows of capital
from other parts of the world. Non-European investment
totalled EUR36bn in 2013, a 27% increase on 2012, pushing
non-European investment to a record 26% share of total
investment. However, in absolute terms these flows are still
below the peak volume of EUR46.1bn seen in 2007 (Figure
2).
Non-European’s consistent net buyers in Europe
Even on a net basis, non European capital has been the only
source to consistently be net positive over the last five
years. Total net investment by non-European investors was
EUR42bn over 2009-13. Both domestic and European
investors were net sellers over the same period. Domestic
investors were net sellers in every year over the period
(Figure 3).
Asian and Middle Eastern capital dominating
Since 2009, net investment into Europe has been
dominated by investors from Asia Pacific. Investors from the
region maintain the biggest net position of EUR14.7bn.
Middle Eastern investors have been the second largest net
contributors since 2009, with net investment of EUR10.6bn.
North American investors were the next biggest net players
at EUR10.5bn although this involved far higher levels of
trading (Figure 4). Global investment managers have been
the most active in the market leading to broadly neutral net
investment.
Figure 2
Non-European investment into Europe, EUR bn
22% 20%
13%
26%
0%
5%
10%
15%
20%
25%
30%
0
10
20
30
40
50
Non-European
Non-European as % of total European investment
Source: DTZ Research
Figure 3
Net investment by source of capital 2009-13, EUR bn
-20
-10
0
10
20
2009 2010 2011 2012 2013
Domestic European Non-European
Source: DTZ Research
Figure 4
Net investment by source of capital 2009-13, EUR bn
-30
-20
-10
0
10
20
30
Asia Pacific Middle East North
America
International Africa
Buy Sell Net
Source: DTZ Research

3. International investment in Europe
www.dtz.com Investment Market Update 3
Sources of Capital
Asian capital coming from a diverse range of sources
Asian investment has experienced consistent growth over
the last five years increasing from EUR2.2bn in 2009, to
EUR8.8bn in 2013. This increase has corresponded with a
growing diversity of investors.
Malaysian’s have been the most active, with volumes of
EUR4.6bn invested since 2009. This figure is mainly
dominated by institutional investors investing in the London
office market. South Korean’s has been the second most
active investor by value, with EUR4.2bn invested since
2009. The volume of activity from these markets has
declined with growing activity from China and Singapore.
In 2013 investment from Singapore totalled EUR2.6bn, 30%
of Asian investment and dominated by GIC’s acquisition of
EUR2bn (Figure 5). Chinese investors have also been
increasingly active with investment of EUR3.1bn since 2009
reflecting mainly investment by the country’s sovereign
wealth fund and institutions of EUR0.97bn and EUR0.6bn
respectively. This excludes increasing activity from
developers towards residential and hotels.
Mid East investment dominated by sovereign wealth funds
Middle Eastern investors have also seen consistent growth
over the past 5 years, with greater diversity been seen in
terms of sources of capital. Overall volumes were EUR5.8bn
in 2013, up from EUR1.6bn in 2009.
Combined, flows from Kuwait, Israel, Qatar and the UAE
totalled EUR11.1bn between 2009 and 2013. Qatari
investment saw a significant increase in 2012, mostly
attributed to EUR3.2bn of investment from their sovereign
fund. Investment from Kuwait and UAE increased
significantly in 2013 representing 66% of Middle Eastern
volumes. This mainly consisted of investment from each
country’s Sovereign Wealth fund of EUR2.9bn and
EUR1.6bn respectively (Figure 6).
US volumes returning to pre-crisis levels
North American investors have been consistently active
across Europe both before and after the global financial
crisis. Both US and Canadian investors have been active net
investors through 2001 and 2012, but in 2013, both
increased the level of sales reducing their overall net
investment to EUR1.5bn (Figure 7). Institutions account for
almost half of Canadian volumes with EUR3.7bn invested
since 2011. Investment from the US is dominated by Private
Property Vehicles accounting for 67% (EUR12.3bn) of
purchases from the country since 2011.
Figure 5
Investment activity by key Asian sources
0%
25%
50%
75%
100%
2009 2010 2011 2012 2013
Singapore China South Korea Malaysia Australia Rest ofAsia
Source: DTZ Research
Figure 6
Investment activity by key Middle Eastern sources
0%
25%
50%
75%
100%
2009 2010 2011 2012 2013
Kuwait UAE Qatar Israel Rest ofMiddle East
Source: DTZ Research
Figure 7
Net investment by North American sources, EUR bn
-8.0
-4.0
0.0
4.0
8.0
2011 2012 2013 2011 2012 2013
Buy Sell Net
US Canada
Source: DTZ Research

4. International investment in Europe
www.dtz.com Investment Market Update 4
Property type
Offices the preferred choice
Offices remain the most popular sector for non-European
investors with EUR 60bn being invested since 2009. This
accounts for 57% of total non-European investment over
the 2009-2013 period. Over two-thirds (EUR40bn) of this
investment was in the UK, notably Central London. Activity
for the office sector throughout Europe peaked in 2013,
when it made up 60% of all property acquisitions (Figure 8).
The retail sector is the second most popular sector, with
EUR 24bn being invested since 2009. This is driven by
shopping centre investment which represented 56%
(EUR13.5bn) of retail volumes, predominantly in the UK and
Germany.
Mixed-use assets continue to attract investors’ interest,
with EUR9.6bn invested in them seen since 2009. The UK
attracted 43% (EUR4.1bn) of this volume followed by
Germany which accounted for 25% (EUR2.4bn).
North America maintains diversified investment in sectors
When comparing investment activity by source some
different patterns emerge. North American investors have
typically split 70% of their investment across the office and
retail sectors (Figure 9). This is in contrast to Asian and
Middle Eastern investors who have been more focussed
towards the office sector, which has represented the bulk of
their commercial investment. New pools of Asian capital are
also now focussed on mixed-use or residential led schemes.
Non-European’s have appetite for larger lot sizes
Since 2004, non-European investment has focussed on lot-
sizes which are generally larger than that of domestic and
European investment (Figure 10). This is because non-
European investors like to be able to deploy their capital in
a quick and efficient process. It is easier to execute this by
investing in larger lots. Many overseas investors also seek to
invest in ‘trophy’ assets which are typically larger lots. Non-
European investors account for 49% of investment in lot-
sizes bigger than EUR1bn.
Figure 8
Non-European investment by property type
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013
Office Retail Industrial Mixed Use Other
Source: DTZ Research
Figure 9
Investment by property type and source of capital 2009-13
0%
20%
40%
60%
80%
100%
Middle East APAC North America
Office Retail Industrial Mixed Use Other
Source: DTZ Research
Figure 10
Average lot size by capital source, EUR m
0
20
40
60
80
100
120
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Domestic European Non-European
Source: DTZ Research

5. International investment in Europe
www.dtz.com Investment Market Update 5
Investor Type
Private Property Vehicles dominating volumes
Since the financial crisis, unlisted funds have been the most
active investors on both the buy and sell side, reflecting the
high proportion of global fund managers (Figure11). Since
2009, non-European sovereign wealth funds have invested
EUR12.6bn in Europe, of which more than half EUR7.5bn
was invested in 2013, representing close to a third of non-
European investment in 2013. Over the last five years
sovereign wealth funds invested a net EUR7.5bn and
institutions added a further EUR3.9bn of net investment.
Target Geography
Asian capital to play central role in coming years
Over 80% of non-European investment has been focussed
on the core three European markets of the UK, Germany
and France (Figure 12). The UK attracts the largest amount
of non-European investment within Europe, accounting for
58% of the total since 2009. London makes up 66% of this
figure with investment of EUR40bn mainly dominated by
private property vehicles and sovereign wealth funds.
Germany accounts for 15% of non-European investment
with volumes of EUR15.2bn. Investment within Germany is
much more diversified with the core five cities making up
65% of volumes. France is the third largest recipient of non-
European investment accounting for 9% of volumes. This
figure, similar to the UK, is dominated by the capital with
over half of volumes going to Paris since 2009.
Outlook
New investors attracted by pricing and liquidity
We continue to see new pools of investment capital
focussed on Europe from outside of the region. This is
partially driven by the build-up of foreign reserves in
emerging markets and the diversification of their asset
base. As a result, we project that over the next two years,
their share of investment will increase further towards 30%
(Figure 13), taking absolute investment towards their peak
level of EUR46bn by 2015. This is a testament to the relative
attractiveness of pricing and the good liquidity which new
investors can find across the region’s diverse commercial
property markets at this time.
Figure 11
Net investment by investor type 2009-2013, EUR bn
-40
-20
0
20
40
60
Unlisted Funds Sovereign Wealth
Fund
Institution
Buy Sell Net
Source: DTZ Research
Figure 12
Destination of non-European investment 2009-2013
58%
15%
9%
5%
13%
UK
Germany
France
Spain
Rest ofEurope
Source: DTZ Research
Figure 13
European investment by capital source 2004-2015, EUR bn
0%
5%
10%
15%
20%
25%
30%
0
50
100
150
200
250
Domestic European
Non-European % Non-European
Source: DTZ Research

6. International investment in Europe
www.dtz.com Investment Market Update 6
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