Industrial investment flows increased across Europe by just 3% in the first half of 2011, according to the latest Jones Lang LaSalle European Industrial Bulletin. Uncertain economic conditions and limited product availability has led to industrial real estate investment volumes stagnating, with activity slowing down rapidly in May and June. This resulted in the second quarter of 2011 seeing the first significant decline on a 12-month rolling basis, down 12% quarter-on-quarter, even though it remained 5% higher year-on-year.

Some EUR 3.5 bn or 80% of the total investment volume was transacted in Western Europe in the first half of the year. This highlights ongoing investor focus on core Western European markets, although this total reflects a 7% decline on the same period last year, with individual country falls seen in Germany (-32%), the UK (-24%) and Norway (-9%).

South Europe recorded a 40% fall in activity and whilst this was driven by concerns over the sovereign debt crisis, significant changes in investment activity in these markets are not unexpected due to the volatile nature of this market. Eastern Europe, on the other hand, saw activity escalate during the first six months of 2011. Whilst overall transaction volumes in Eastern Europe (excluding Russia) remained low, they increased 82% compared to H1 2010. In comparison investment volumes in Russia saw a dramatic eightfold increase compared to the first half of 2010.

International investors (sourcing capital from a wide range of markets) returned in force and accounted for EUR 1.9 bn of total activity, compared to EUR 300 mln overall in 2010. While the group's main focus unsurprisingly was the core Western European markets (the UK and Germany in particular), they were also active elsewhere, as they purchased assets in the Czech Republic, Russia, Italy and Spain.