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ECB chief Mario Draghi's €1.1 tln quantitative easing (QE) programme was a key driver behind the doubling of cross-border capital investment in European real estate to €38 bn in the first three months of 2015, according to Colliers International.

In the same period last year, the volume came to €19 bn.

'Europe still remains the focus of global capital flows with the US recovering quicker and their gateway cities deemed expensive, Asia economies slowing and Australia tipped to enter a recession,' said Richard Divall, Colliers International EMEA head of cross-border capital markets.

'Although European economic recovery has slowed, quantitative easing will make currency play a bigger part in global capital targeting Europe for real estate this year,' he added.

Research for Colliers International's European Capital Flows report for Q1 confirms that London continues to be Europe’s favourite cross-border market. The UK capital contributed almost a quarter (23%) of all investment volumes with about €9 bn during Q1, followed by Paris with €2.1 bn investment.

Colliers states that US investors have taken advantage of the weak euro currency, investing €44 bn into the market over the previous 12 months.

Regional spread
Behind London and Paris, Dublin’s first quarter investment totalled more than half of its 2014 total at more than €920 mln, thanks to a strong foreign investment appetite in the office market. Key deals were US Starwood’s global REIT acquiring Lone Star’s Dublin office portfolio for €350 mln and Union Investment’s €232 mln acquisition of Facebook’s headquarters in Dublin.

In Q1, Italy saw a huge increase in volumes particularly from opportunistic capital as its bad banks, such as Unicredit and Prelios, start to sell its bad loans. China’s Fosun, Switzerland’s Partners Croup, Blackstone, Kennedy Wilson and Cerberus all have enjoyed success to date this year.

Across European countries during the first quarter, foreign capital investment totalled €9.7 bn in Germany, €1.9 bn in Italy and 1.3 bn in the Netherlands.

M&A
Colliers International also noted increasing mergers and acquisitions activity as global investors, who have raised unprecedented levels of capital for real estate acquisitions, seek to gain quick access to existing European portfolios with experienced property teams.

The report cites the 'notable successes' of Australia’s Cromwell Property Group acquiring Valad Europe; Northern Realty Finance Corporation’s US REIT acquiring a 15% stake in pan-Europe fund manager Aerium; a TPG-led consortium acquiring Cushman & Wakefield to merge it with DTZ; and Pimco and Griffin Real Estate buying a share of Echo Investments, a Polish property company with €1.5 bn of AUM.

In addition, Unibail-Rodamco was rumoured to be targeting Australian shopping centre giant Westfield. The move, yet to materialise, is believed to be driven by investor pressure following the merger in 2014 of Unibail-Rodamco's European peers, Klépierre and Corio.

Asia-Pacific investors are also on the offensive. Collier's Capital flows report underlines that APAC investors have been responsible for 'breathing new life' into London development projects and large-scale regeneration projects, citing AustralianSuper’s 25% stake in Kings Cross (£200 mln); Temasek-led AXA’s development of Bishopsgate Tower (formerly known as The Pinnacle); and China Minsheng Investment Corporation’s £1 bn injection into the regeneration of Albert Docks.

Logistics is growing from strength to strength with the latest platform set up between Singapore’s GIC and Exeter Property Group targeting €300 mln across Europe. Logicor continues to build up its European portfolio and AEW Europe has had notable recent success with its new pan-European logistics fund.

See the full report below