Commercial real estate deals in Europe are becoming more complex and are taking longer to complete, a new report reveals. The Real Estate Transaction Barometer 2022 conducted by provider of virtual data rooms Drooms, evaluated more than 4000 transactions between the years 2019 and 2022, as well as surveying 172 real estate professionals in several large European markets.
The trend shows that cross key European markets, the duration of a real estate deal from the bidding process to the closing has drastically lengthened over the last 3 years. While in 2019, the number of days between the start and close of transaction was just 165, this figure had shot up to 258 in the first half of 2022 – a staggering 58% increase in the average duration since 2019.
Delays caused by the Covid-19 has played a significant role in this development, the report explains, as many deals were put on hold during this period. Today, the uncertainty surrounding interest rate increases, the Ukraine conflict and inflation are making buyers a lot more hesitant with their investment decisions. Harder negotiations can make the dealmaking process much more difficult to complete, it adds. On top of the present economic situation, fragmented market regulations add to the complexity, presenting investment players with new challenges.
However, the also study shows that the market is optimistic, despite the deteriorating economic situation, with international real estate investments remaining high on the agenda for 2023. Approximately one third of the real estate professionals surveyed by Drooms plan to expand their investments into foreign commercial properties, with only approximately 17% wanting to cut back their international investments next year.
In addition to the diversification opportunities that come with international transactions, the opportunities to increase return on investment are likely to be the most important factors contributing to this. Investors from Germany (51%), the US (26%) and the UK (23%) are the main drivers of the European real estate market.
The study also reveals that acting at international level requires thorough risk assessment – even within the EU. Founded in 2001 by M&A and legal experts, Drooms is an entrepreneurial European proptech company based in Frankfurt and Zug with Branch offices in Munich, London, Paris, Amsterdam, Vienna, Madrid and Milan.