Publications

Globalisation, political turbulence, changes in urban living patterns, increased digitisation, shifting consumer behaviour and flexible working are just some of the issues that are transforming the demands...

Real estate investment markets remain stable whilst buyers continue to catch up in contractual risk allocation Logistics assets more popular than everDemand from international investors reaches record high accounting for 55% of deals, with most international investors still being from within EuropeIncreased desire for security on the part of sellers continued to be a feature in 2021: share of transactions in which the buyer's payment obligations are secured reaches another record high­Buy­er-friendly trend in contractual risk allocation continues as seller-friendly provisions on limitation of liability continue to declineThe European real estate investment market appears to have largely recovered from the consequences of the COVID-19 pandemic in 2021. Compared to the pan­dem­ic-stricken previous year, total investment increased by around 15% to approximately EUR 270 billion, marking a return to the pre-crisis level. Logistics assets performed particularly well last year, having become the focus of investors’ attention due to their stable income flows and the ongoing growth of online shopping. Demand from international investors was also up again in 2021, with intra-European transactions being the rule. 2021 also brought a new record high in the number of transactions in which the buyer's payment obligations were secured. With regard to contract design, the buyer-friendly trend continued, as reflected especially by a decrease in de minimis and basket clauses as well as caps. Logistics assets more popular than ever Office properties were a popular asset class in 2021 despite all the uncertainty surrounding the COVID-19 pandemic, although some market share was lost to logistics and residential. The slight downward trend in office transactions handled by CMS seen in previous years nonetheless continued, with their share declining from 30% in 2020 to 19%. The reason for the declining proportion of transactions in the office segment is likely to be two-fold, combining the lack of available core properties and the current uncertainty around the impact of hybrid ways of working on demand for office space. The residential and logistics asset classes on the other hand were especially popular in 2021, each with a market share of 23%, compared to 22% and 19% respectively in 2020. One of the key factors for this trend was the stable income generated by residential and logistics properties, which is particularly attractive to investors. Logistics assets additionally benefited from the ongoing growth of online shopping, which was boosted recently by the COVID-19 pandemic and the related closure of retail shops, leading to an increased need for delivery and distribution centres. High demand from international, mostly intra-European, investors International investors were more active again last year: they accounted for 55% of deals in 2021, compared to 43% in 2020. In 2020, international investors had a difficult time, not least due to the impact of the COVID-19 pandemic. The associated travel restrictions meant that many international investors from other continents were forced to postpone their planned transactions. The property market seems to have recovered from these effects last year, with a new record 55% of transactions involving foreign investors. However, these foreign investors were mostly from within Europe; the number of intercontinental transactions remained below pre-pandemic levels in 2021. Sellers seek security An increased desire for security on the part of sellers continued to be a feature in 2021. The share of transactions in which steps were taken to ensure that the buyer met its financial obligations rose further in 2021. Sellers were granted security in more than two thirds of cases (70%). This trend is consistent with 2020, when an increased desire for security on the part of sellers was already apparent. In contrast, security was agreed in less than 50% of all transactions in the period from 2015 to 2018. The current high level is due in part to an increased desire for security on the part of sellers as a result of the COVID-19 pandemic; they were often uncertain about the buyer’s solvency going forward. Buyers continue to catch up in contractual risk allocation Buyers were able to catch up further in terms of contractual risk allocation. The proportion of transactions with seller-friendly de minimis clauses and basket clauses (i.e. clauses that provide for a threshold or minimum limit for guarantee claims by the buyer) stagnated or declined somewhat compared with the preceding years. In the previous year, after a noticeable decline, agreements aimed at limiting liability were made in 44% (de minimis clauses) and 41% (basket clauses) of cases. The share of deals with a basket clause fell further to 32% in 2021. As in 2020, a de minimis clause was included in 44% of the transactions analysed. A similar trend was seen in con­trac­tu­ally-agreed liability caps. Whilst the proportion of transactions with a cap was well over 60% in some cases in the years up to 2018, the percentage of agreements with a con­trac­tu­ally-agreed maximum liability fell slightly from 56% in 2020 to 50%.

What’s next? In a world of ever-ac­cel­er­at­ing change, staying ahead of the curve and knowing what’s next for your business or sector is essential. At CMS, we see ourselves not only as your legal advisers but also as your business partners. We work together with you to not only resolve current issues but to anticipate future challenges and innovate to meet them. With our latest publication, CMS Next, our experts will regularly offer you insights into and fresh perspectives on a range of issues that businesses have to deal with – from ESG agendas to restructuring after the pandemic or facing the digital transformation. We will also share with you more about the work that we are doing for our clients, helping them innovate, grow and mitigate risk. To be able to provide you with the best support, we immerse ourselves in your world to understand your legal needs and challenges. However, it is equally important that you know who we are and how we can work with you. So, we invite you to meet our experts and catch a glimpse of what is happening inside CMS. Enjoy reading this publication, which we will update regularly with new content. CMS Executive Team

Globalisation, political turbulence, changes in urban living patterns, increased digitisation, shifting consumer behaviour and flexible working are just some of the issues that are transforming the demands...

The COVID-19 pandemic has left its mark on the European investment market. Investment volumes were around 23% lower than in the previous year, 2019, with its record performance. Buyers focused primarily on properties with stable income and those only minimally affected by the pandemic. The number of transactions in which steps were taken to ensure the buyer met its financial obligations was at a record high. The trend towards more buyer-friendly arrangements continued. Those are the key findings of the CMS European Real Estate Deal Point Study 2021. For the latest edition of this survey of the European real estate transaction market, international commercial law firm CMS systematically assessed and evaluated more than 1,900 real estate agreements on which it advised in countries across Europe from the beginning of 2010 to the end of 2020. The key find­ings:In­vestors focus on stable incomeThe COVID-19 pandemic led to a change in investor interest in the individual asset classes. Buyers focused primarily on properties with stable income and those that were only minimally affected by the pandemic. Logistics and residential properties were especially popular. Office real estate remained the strongest asset class in Europe, but its share of the market fell to a record low of 30%. Demand for retail properties remained at a consistently low level (15%). Logistics real estate performed particularly well, posting a rise to 19% , a new record. The proportion of investment going into specialist properties such as hotels fell significantly (14%). Residential real estate proved popular with investors, with its share rising to 22%. Sellers taking steps to ensure that buyers meet their financial ob­lig­a­tionsDur­ing the pandemic, an increased need for security on the part of sellers was apparent. The proportion of transactions in which steps were taken to ensure the buyer met its financial obligations rose to a record high of 64%. In previous years, security was agreed in less than 50% of all transactions. This high level is due to the increased desire for security on the part of sellers as a result of the pandemic; they were often uncertain about the buyer’s solvency going forward. As a means of providing security, both bank guarantees (17%) and a notary’s escrow account (10%) became less popular. In many cases, in contrast, the buyer made an advance payment (29%). In 9% of transactions, use was made of submission to immediate enforcement. Risk allocation in contracts: buyers catching up in a seller-friendly marketBuyers were able to strengthen their position further in 2020 with regard to risk allocation in contracts. In a market environment that remained very seller-friendly, they succeeded in obtaining favourable contract terms more often than in previous years. As part of the warranty, guarantees were again agreed more often in favour of buyers. The percentage of agreements with individual liability provisions increased to 75%. It was common practice to provide for both subjective and objective guarantees. The proportion of deals with seller-friendly limits on liability, such as de minimis and basket clauses and caps, dropped slightly below the prior-year level in 2020. The upward trend seen over many years in agreements aimed at limiting liability has thus been curbed somewhat, while buyers were able to negotiate more favourable contract terms more often than before. Buyers also prepared ground with regard to the contractual provisions on limitation periods. An increasing number of limitation periods from 18 to 24 months were agreed in 2020, while there was a slight fall in the proportion of short limitation periods of up to 18 months. National investors more prom­in­entIn­t­er­na­tion­al investors had a tough time in 2020. While international sellers have been responsible for the majority of deals since 2017, their percentage dropped back down to 43% in 2020, with national investors becoming more active. National investors accounted for 48% of deals in 2018, while in 2020, 57% of real estate investments were made by national investors.

A first glance suggests there were no major changes in the European investment market in 2018, with the investment volume being roughly the same as in the previous year at around EUR 264bn. However...

The European investment market once again had a very strong year. At EUR 234 bn, total investment volume was only 3% below the record level seen in 2015. This figure also represents an increase of 7%...

Editorial We have been deeply saddened by the loss of Jean-Marie De Backer on 16 June 2018. Our founding partner in 1987 and a driving force behind the merger with CMS in 2005, we owe him the success...

Editorial Dear reader,I have the great pleasure to announce that Elke Duden joined CMS as a partner in our Employment and Pensions Department as from 1 May 2018. Elke, an internationally renowned specialist...

Editorial Dear Reader,We hope that your new year has gotten off to a good start. As always, we are pleased to bring you the latest legal news in our monthly newsletter, which contains updates on banking...

The European investment market continued to perform well after the previous re­cord-break­ing years. In 2016, total investment volume was around EUR 230bn, less than 10% below the record amount of the...