Modest global growth
We expect global GDP to grow by 2.9% y/y in 2024 and 2.8% y/y 2025. However, the balance in global growth is shifting. Rising real incomes, lower interest rates and public investment will support a recovery in the Eurozone. Meanwhile, growth is expected to slow acr ss other major economies.
Inflation rates return to central bank targets
Headline inflation rates have temporarily dipped below central bank targets in recent months. While domestic price pressures remain elevated, forward-looking indicators point to further declines. The European Central Bank has increased its pace of interest rate cuts.
Investment shows first signs of growth
€147bn were invested in commercial real estate over the past 12 months, which represents a 7 % decrease compared to Q3 2023. Easing rate of fallback suggests mid 2024 will be the bottom for the CRE investment market following the crash triggered by inflationary shock. The rise of 1% between Q2 2024 and Q3 2024 is another indicator of recovery.
Yields holding the line
Central banks are clearly on a rate cutting path and beginning to transition their focus to growth rather inflation. Consequently, a floor now exists for real estate yields. Since Q4 2023 prime yields across all asset classes have remained constant and likely to stay that way for 2024.
Office letting: take-up gains momentum
5.73m sqm has been transacted since January 2024 in the 18 main European markets, marginally ahead of 2023 (+2%) driven by select markets. The overall result remains below the 9-month long-term average (-14%) reflecting the ongoing structural changes in the office market where occupier activity focuses on smaller but more efficient premises.
The polarisation of office markets is increasing
Vacancy expansion in numerous markets is the consequence of a growing geographical and quality mismatch in supply and demand. Low availability prevails in central submarkets, particularly with new buildings that secure demand. Much higher vacancy rates though are found in peripheral office districts and for second-hand space.
