Europe CRE 360 - November 24

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 across other major economies.

Investment shows first signs of growth

• €108.8bn were invested in Europe over the 9 months of 2024, rising by 8% compared to 2023. The increase is driven by all asset classes except offices.
• Easing rate of fallback suggests mid-2024 will be the bottom for the CRE investment market following the crash triggered by inflationary shock.

Office letting: Take-up gains momentum

• 5.73 m sqm has been transacted since January 2024 in the 18 main European markets, marginally ahead of 2023 (+2%) driven by selected 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. 

Logistics Investment finds its way back to growth

• Over the 9 months of 2024, the occupier market decreased by 6% in the leading European markets compared to 2023. Demand has been lagging in most countries.
• Industrial and logistics investment increased by 17% in Europe over the 9 months of 2024. The volume of investment rose in most countries, an encouraging trend for the rest of the year. Yield decompression has closed with stabilisation recorded almost everywhere in Europe.

Retail:  promising prospects for occupier market

• Retail recorded a decrease of 9% in investment volume over the past 12 months. Investors show most confidence in the core markets, as Germany, the UK and France captured almost two-thirds of transaction volume.
• The occupier market proved resilient, notably thanks to the continuing strong flow of tourists which is returning to pre-pandemics levels. Furthermore, the slowdown of inflation rate will impact positively real wages and consumer confidence, thus boosting domestic consumption across Europe. 

Residential: heterogeneous momentum

• Residential investment is recovering, +2.3% y/y in 9m 2024. Housing transaction volume dropped by 8.9% y/y in Q2 2024 but seems to consolidate if we compare H1 2024 vs H1 2023. 
• House prices in Europe are expanding again +1.9% y/y across European cities but momentum is heterogeneous across Europe. On the contrary, rental values are still booming, +7.1% y/y in Q2 2024 owing to the shift in the monetary policy and the ongoing regulations in Europe.