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Review of Commercial Property Activity in 2016

January 2, 2017

Early on, it became clear that the records set in 2015 were unlikely to be repeated in 2016. This has been a year of turbulence and surprises, most obviously in western politics, but also in everything from the discovery of gravitational waves to the record-breaking achievements at the Summer Olympics. The turmoil in the property and finance sectors, in particular, stood in sharp contrast to the relatively mild and uneventful 2014–2015 period.



For commercial property, a quick look at the numbers for 2016 may well suggest it is a year to forget. Faced with a period of political and economic uncertainty, British pride in national independence was quickly slapped down by the scrupulous and uncompromising hand of the market: in the first nine months of 2016, UK commercial property transactions fell 32% relative to the same period the year before. Third quarter 2016 was particularly brutal for the UK: investment volumes fell by over 40% relative to Q3 2015. The political upheaval from Brexit is the self-evident culprit of such dramatic market fluctuations. Six months on and the UK Government is still trying to take control of its policy planning, before it can begin to take control back from Europe.


The base-effect of a record 2015 only goes a limited way towards explaining the steepness of the plunge in activity during 2016.  If recent property market history teaches us anything, it should remind us that it takes the market more than three times as long to increase by €150 billion in transactions per quarter than it takes it to decrease by €150 billion per quarter. Whether due to Brexit or other causes, a 40% drop in activity in the UK in Q3 is severe. From there, a return to the previous level would need close to a 70% increase in activity, which is a tall order.


The UK performance has held back the rest of Europe too: otherwise increasing continental European volumes, fell by 10% in the period between Q4 2015 and Q3 2016 relative to the previous four quarters. Germany remains the sweetheart of most property investors. In Q3, it overtook the UK to become Europe’s largest property investment market. Low interest rates and ample credit financing compounded the flight-to-safety away from UK property and helped push Germany up to the top spot.


2016 was also a record-breaking year in peripheral Central and Eastern European markets, while exuberant South African investors helped push investment activity across many South East European (SEE) countries into statistically significant territory. Their acquisitions and choice of strategy defied many more conservative sceptics and still continues to drive activity in most markets. The coming years will tell whether this is a myopic storm of investment activity or if, in fact, the granular and opaque markets of SEE have turned a corner and are heading for maturity. 


The biggest shock of 2016 came, of course, with the election of Donald Trump. Much like the non-impact of Brexit on markets in the USA in the short term, the impact of the US election result is yet to trickle down to the European property market. Although the results are known, the two major political events of 2016 have raised as many questions as they have answered. Instead of providing clarity and a sound political foundation on which the property market might thrive in the years to come, 2016 has pointed the way towards a very uncertain 2017.


*CBRE, Cushman & Wakefiled, JLL

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