Europe CRE 360 - September 24

Economic recovery underway in Europe

• The global economy has proved resilient in the face of strong economic headwinds.
• We expect global GDP to grow by 2.9% p.a. in 2024 and 2025.
• Rising real incomes and lower interest rates will support a recovery in Eurozone economic activity.

Inflation rates normalise

• Inflation rates have made significant progress towards central bank targets.
• That said, much of the decline in inflation has been driven by global factors. Relatively little progress has been made on the domestically generated parts of inflation.
• As a result, central banks will remain cautious about lowering interest rates.

Investment settling down

• €143bn were invested in commercial real estate over the 12 months to Q2 2024, which represents a 25 % decrease compared to Q2 2023.
• Though still lower annually,  the rate of decline is halved and represents light at the end of the tunnel for the CRE sector. The investment market seems to be settling down following the inflationary shock triggered by post pandemic recovery and the Ukraine war.

Office letting: a subdued H1 2024

• 3.72 m sqm was transacted over H1 24 in the 18 main European markets, in line with H1 23 overall result. H1 volumes stood at 16% below their H1 10-year average.
• While some markets have experienced a new decline in volumes, take-up gained traction in many markets.
• Overall, 2024 letting volumes should be in line with 2023 results. 

Low momentum for European logistics

• Take-up decreased by 5% in H1 2024 across the leading European countries. Occupiers concern about cost control in a still weak economy inhibits expansion.
• Industrial and logistics investment increased by 6% in Europe during H1 2024. The volume of investment rose in a number of individual countries, an encouraging trend for the rest of the year. Yield stabilisation was recorded in most countries over the past two quarters. 

Retail:  promising prospects for occupier market

• Investor interest in retail assets remains selective though the sector is slowly gaining more traction in investment market share (19% in Q2 2024).
• 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.