Europe’s asset management agencies have almost €264bn (£207bn) of European non-core real estate exposure, Cushman & Wakefield has estimated.

The net figure, when loan loss provisions are taken into account, is about €173bn, the global property adviser’s latest European Real Estate Loan Sales Market report says.

Cushman & Wakefield arrived at the estimate by analysing 10 European asset management agencies to determine their combined gross, or face-value, non-core real estate exposure and to estimate the expected levels of commercial real estate (CRE) loan and real estate owned (REO) sales going forward.

The figures relate to the face value of European CRE loans, residential mortgages and REOs held by entities that European governments have set up to externally receive and then liquidate the “bad” assets of one or more national banks.

Cushman & Wakefield recorded €54.9bn of closed CRE loan and REO transactions this year to date – more than the volume completed in 2012 and 2013 combined. 

With a pipeline of €30.8bn in live sales and €24bn in planned disposals, the total volume for 2014 is likely to break through €60bn, the report says.

The UK continues to dominate the market, accounting for 37% of closed transaction by volume, with a further 25% relating to Spain and 21% to Ireland.

Frank Nickel, chairman of Cushman & Wakefield’s EMEA corporate finance group, said that while the UK, Spain and Ireland continued to dominate the investment landscape, new locations were beginning to attract global capital for the first time – a trend that was set to continue with the ongoing asset quality reviews helping to facilitate the deleveraging process.

“However, investors will remain cautious in regards to new markets, with the country’s legal system being a crucial investment factor,” he said.

Federico Montero, Cushman & Wakefield’s head of EMEA loan sales, said that many European banks would be forced to finally face up to the fact that if they held troubled assets they would be required to reclassify them in the upcoming stress tests which might cause capital requirement challenges. 

“With the clear success of the Irish and Spanish asset management agencies, other European governments may follow suit in setting up asset management agencies to work out the non-core exposures,” he said.