Global picture remains mixed
The latest economic data paint a mixed picture. In both the Eurozone and the US, the signal from most confidence surveys in December is encouraging. But it is still too early to conclude to a bottoming out. The economic situation also remains vulnerable to geopolitical tensions. Our 2024 growth forecasts for the OECD countries are close to those of the ECB.
Investment plummeted in 2023
An unfinished repricing process kept Investment in the deep freeze over 2023 All asset classes experienced a strong reduction. Offices (-59%) showed strongest declines while hotels (-26%) and retail (-40%) incurred the least declines. Logistics volumes fell 48% though this sector has experienced some of the most rapid repricing and may now be stable.
Office: letting activity remained subdued in 2023
7.60 m sqm was transacted in Europe’s 17 main markets over 2023, down by 19% vs 2022. Annual volumes are below their long-term average (-16%). This decline is mostly due to a reduced number of very large transactions. Occupiers are looking for space optimization to meet hybrid working patterns and reduce costs.
Low momentum for European logistics
Take-up decreased by 35% in 2023 in the leading European countries whilst vacancy rates remained low, still creating upward pressure on rents. The investment market bottomed out; the volumes were reduced by half in 2023. Yield correction is nearly complete in most countries and signs of improvements are expected in the next quarters.
Retail: a mixed picture for the market
Although European retail has seen a drop in investment compared to Q4 2022, it is regaining market share, taking second place in the French investment market. Despite its difficulties in high street and shopping centres in particular, the occupier market remains resilient, thanks to the continuing strong flow of tourists across Southern/Mediterranean Europe.
Residential: A fading cycle
Residential investment plummeted by 46% in 2023 y/y. Housing transaction volume dropped by 13% driven by tight credit conditions. Consequently, house prices in Europe continue to fall at -1.6% vs last year. Rental values are still booming owing to the shift in the monetary policy and the drop of listed property put up for rent.
