2022 Real Estate Transactions Barometer: a situation that is getting more complicated in Europe

Transactions become more complex, more time-consuming and more expensive

The study shows that between the call for tenders and the closing, the duration of business transactions has increased considerably. While in 2019, the time between the opening of a transaction data room and the closing of the transaction did not exceed 165 days, it reached 258 days in the first half of 2022, an increase of 58%. Even more strikingly, the duration of transactions increased exponentially by 33% between 2019 and 2020.

For Alexandre Grellier, CEO and co-founder of Drooms: “The increase in the time required by real estate transactions is therefore clearly demonstrated. This situation is partly due to the delays accumulated during the coronavirus pandemic and caused by the economic climate. To this we must add the proliferation of regulations, for example in the ESG field, which prolongs the procedures. At the same time, transactional activity has fallen sharply since the start of the pandemic. Nevertheless, our research indicates that the market is optimistic, at least in the long term. »

Despite the uncertainty, more than a third of professionals in the sector plan to increase their international investments

The market seems generally optimistic, despite the uncertainty generated by rising interest rates, the Ukrainian conflict and inflation. More than a third (36%) of experts surveyed by Drooms plan to expand their investments into international property markets. About 47% are preparing to invest about as much as before, while only 17% will reduce their activities. German companies seem more cautious. Almost 20% of respondents plan to reduce their investment activities, 23% plan to expand them. 58% will invest about the same as the previous year. In the UK, investors identified opportunities. In this country, no less than 82% of the participants in the survey answered that they wanted to develop their international activities. In France, the majority (64%) of real estate professionals also want to invest more internationally. Spanish respondents seem relatively undecided: 42% want to become more internationally active and 46% plan to invest about as much as in the previous period.

For Grellier: “Despite the current circumstances and the constraints they place on the transaction market, international real estate investment is on the rise. This therefore implies that the market not only offers opportunities to increase the return on existing investments, but also the potential for diversification. Most German investors prefer to reduce their international investments, but this trend may also be justified by the strength of their domestic market. »

More than a third of investors plan to invest at least 25% of their capital in international markets

The survey also revealed that 36% of real estate experts are willing to invest at least a quarter of their capital in international markets. 16% even want to invest at least half of their capital in this area. British investors are the most attracted to the international market: around 73% of participants wish to invest at least 25% of their capital abroad. On the other hand, almost 70% of the German experts questioned intend to invest only 25% at most in the international markets.

Fragmented regulations are currently the main challenge for international investments

For 47% of respondents, local specificities and the fragmentation of regulations in target markets are the main reasons for the reluctance to transnational real estate investments. 28% believe that lack of access and knowledge of the market also play an important role.

As Mr. Grellier explains: “The European Union is not as unified as one would like to believe. Its regulations are in fact enshrined in national law in different ways depending on the country. Grellier specifies: “Not all market players have the same vision on this point. This is why transparency during the transactional process, and the entire cycle of documentation and real estate data, plays a decisive role in responding quickly to all regulatory requirements. Failure to meet these requirements can cost time and money. But these risks can be significantly reduced by choosing digital document and transaction management solutions. »

Americans, Germans and Brits are the main drivers of the European real estate market

This study concluded that the Germans (51%), Americans (26%) and the British (23%) are the main drivers of the European property market. In fact, European markets generally benefit from a position that is largely internationally oriented. In the UK, 30% of respondents said foreign investors were the most influential in their market. In France, this figure is 64%, while in Germany it does not exceed 31%. According to the survey, Spain emerges as one of the most international markets in Europe, with 73% of respondents citing foreign investors as the most active in their market.

The survey also found that markets in the DACH region (Germany, Austria and Switzerland) and the UK were the most attractive to capital investors, with 52% and 26% of responses respectively. However, the experts also recognize that the CEE region (Central and Eastern Europe) offers significant potential (21%).

Rising demand for logistics and residential, professional spaces in imminent progress

According to real estate professionals, the logistics and residential asset classes are the most attractive with a respective share of 34% and 27%. For investors, they offer the greatest investment opportunities, due to their stable cash flow and manageable risks. Professional spaces (16%) remain attractive, even if many employees work more from home.