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Commercial property investment slows across Europe despite strong demand Back  
Direct investment in commercial property in Europe in the first half of this year was €31.4 billion, 18% lower than the € 36.5 billion recorded in the same period of 2002, according to Jones Lang LaSalle€s European Capital Markets Bulletin.

However, the report found that investment would have been higher but for a shortage of available property, caused mainly by fewer developments coming onto the market and a mismatch between sellers€ and buyers€ price expectations.

Demand for investment property remained high, the report said. A substantial weight of capital is seeking well-let, income-producing property and is helping to keep yields stable despite falling rental levels across Europe.

The continuing availability of cheap bank loans, except for speculative developments, has fuelled debt-driven investors including private individuals and property companies, and these accounted for half of all investment transactions in the first half of the year.

Cross-border investment, i.e. involving a foreign buyer or seller, was €14.4 billion during the half year and represented 46% of total investment activity. The UK and France continued to be the most popular destinations for cross-border investment with France up 12% on the same period in 2002.

Cross-border investment was led by German open-ended funds, which have over €15 billion to invest and are particularly active in France. US-managed opportunity funds also have substantial capital to spend on European property, but find it increasingly difficult to achieve ambitious target returns of over 20%.

Looking forward, Jones Lang LaSalle estimates that investors now have over €100 billion, including debt finance, to spend on commercial property across Europe. In view of the number of transactions in the pipeline, it forecasts that the second half of the year will see a higher value of investment than the first. But it concludes that 2003 is likely to fall short of 2002€s record level of €87.3 billion by about 10%.

For further information contact John Moran or Margaret Fleming at Dublin 673 1600 or
Tim Francis, European Research, at London 20 7399 5163.

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