Real Estate

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%.