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Europe - CRE 180 report - April 2022

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Multiple shocks are hitting the economy

Many factors are testing the resilience of the global economy: the Chinese response to rising Covid-19 infections; the war in Ukraine; the increase of commodity prices and the tightening in US monetary policy. The significant carry-over effect from last year’s growth is supporting the outlook for this year.
 

Should we be worried about stagflation?

The inflationary shock is spreading while growth faces even greater threats. However, the economy is still in a post-Covid rebound phase with strong momentum, excess savings, investment needs and fiscal support measures. This should help ease the risk of stagflation.

Investment back to pre Covid-19 levels

€63.2bn were invested in Europe in Q1 2022, which represents a +28% increase vs Q1 2021. This has been the second best result for a Q1 since 2020. Offices (+60%), hotels (+33%), retail (+26%) showed  significant improvement as well as logistics to a lesser extent (+10%).

Yield compression resumes

After drawing to a halt during 2020, office prime yields froze all over Europe, but they have been narrowing again since 2021. Prime retail yields also froze and are now compressing albeit in selected markets. Prime logistics yield compression maybe slowing down.

Office: buoyant start to the year

Take-up at the end of Q1 2022 recorded a significant increase (+43%) compared to last year with 2,7 million sqm transacted. Letting activity is pursuing its path to recovery and quarterly volumes have returned to long-term averages. 

Prime rents unaffected by the crisis

Despite the slowdown in take-up, the prime market segment did not suffer from the crisis. In many markets, prime rental values are now even at higher values than before the outbreak of the pandemic. 

CRE180-April 2022
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