Is recession inevitable?
The drop in gas prices, the decline in headline inflation and the improvement of survey data in December are giving the impression that for the Eurozone, 2023 might be better than expected. However, it is most likely that in twelve months’ time we will look back at 2023 as a recession year, a year of disinflation, and a year when central bank interest rates reached their terminal rate and stabilized.
Investment plummeting
The dramatic increase in financing costs in Europe during 2022, led to repricing in H2. Consequently, investment plummeted over the rest of the year to reach €248bn (-14% vs 2021), and 7% below the average of the last 5 years.
The Q4 volume of €47bn (-57% vs Q4 2021) was the lowest quarter of the year when Q4 is generally the most active.
Office take-up returned to its long-term average
Take-up at the end of 2022 saw a significant increase (+11%) compared to last year. Almost 11 million sqm was transacted in Europe’s 25 main markets, in line with the 10-year average. Letting activity showed first signs of consolidation in Q4, with the post Covid-19 rebound mitigating.
Resilience for European logistics markets
The logistics market in Europe proved resilient despite a difficult political and economic environment. Low vacancy rates and limited land availability continue to push rents up and magnified by construction costs.
Rental growth prospects remain attractive to investors. Consequently, capital markets recorded strong volumes across Europe despite the slowdown at the end of 2022 as prices adjusted.
Retail survived the inflation surge in 2022
Good transactional activity over H1 meant retail experienced an increase in investment volumes (+2.6% vs 2021). Despite a turbulent year for the industry, retail sales were healthy thanks to the strong recovery in tourism and footfall in every European city. This helped brands continue to plan business expansion with store rolls out, particularly in the discount range and luxury segment.
Residential: rental sector momentum
Residential investment plummeted by 42% in 2022. Housing transaction volume dropped by 7.8%. House prices continue to rise but at a slower pace +5.1% after +6.7% at the beginning of the year. Rental values are booming owing to the shift in the monetary policy and the drop of listed property put up for rents.
