As momentum builds in the European commercial property market, investment volumes are expected to climb further in both the core and periphery of the region.

This year's investment volumes in the European commercial property market is on track to hit €230 billion ($259 billion), which would make 2015 the best year since the market peak of 2007, according to Knight Frank.

Over the first half of 2015, transaction volumes reached €104.9 billion, a 29 per cent increase from the corresponding period a year ago. Europe's two largest markets, the UK and Germany, were highlighted as key drivers of the upswing. The UK is set for a record-breaking year for investment, while the German market has been buoyed by the strong performances of Frankfurt and Berlin, said Knight Frank.

The most notable jumps in market activity came in Italy and Portugal. Spain and Ireland also enjoyed higher levels of investment as the revival of activity in Europe’s peripheral countries continued.

“Investment volumes continue to be driven upwards by the strong international demand for European commercial property, particularly from US investors, and by the increasing number of large portfolio deals,” said Knight Frank's head of European capital markets, Andrew Sim.

“These trends are expected to continue over the rest of the year, and we forecast that annual European investment in 2015 will be more than 20 per cent up on 2014. European transaction volumes are approaching the levels seen at the market peak of 2007, and several countries may well set new records this year.”

Rental growth, however, was patchy in the second quarter, with Dublin, Madrid and Vienna being among the few European markets to experience rises in prime office rents. Knight Frank said the medium term is expected to bring more pronounced rental growth on the back of an improving European economy and falling availability levels, particularly for offices in central business districts.

“Office take-up increased strongly in the key German and Spanish markets during H1, but Paris saw muted levels of leasing activity. Over the last 12 months, office rental growth has been moderate outside of the hotspots of Dublin and London, but we expect to see more widespread increases in prime office rents over the coming quarters, particularly as supply shortages are emerging in many key European city centres,” said Matthew Colbourne, associate, international research at Knight Frank.