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Europe - CRE 180 report - January 2022

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Economic growth is easing in the Eurozone

A normalization in growth is expected in Europe, with household spending underpinned by cheap financing conditions, a further improvement in the
labour market and faster wage growth. Stronger supply chain disruptions and inflationary pressures may have a negative impact on 2022.

 

A normalization of inflation and monetary policy

Most of this inflationary surge is still transitory, but that does not mean that we expect it to ease rapidly. This implies that monetary policy will normalize as well, but with important differences in timing, with the Fed and the BoE moving first.

 

Investment back to pre covid-19 levels

€272.7bn was invested in Europe over 2021, which represents a 15% increase vs 2020,  in line with the pre-Covid-19 levels. Investment in logistics (+51%)  reached an all-time high while office (+10%) and hotel (+33%) investments are on the road to recovery. However retail investment (-7%) continues its descent.

 

Yield compression resumed

After drawing to a halt during 2020, office prime yields froze all over Europe, but they seem to be narrowing again. Prime retail yields also froze and are now expanding again in some markets. Prime logistics yields, on the other hand, continually decreased during the crisis. Compression accelerated from Q2 2021 and is ongoing.

 

Office: very dynamic Q3 and Q4

Take-up at the end of 2021 saw a significant increase (+27%) compared to last year. Slightly more than 10 million sqm was taken-up last year. Even though the pre-covid levels are not reached, take-up showed signs of normalisation in Q3 and Q4.

 

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 standing at higher values than before the outbreak of the pandemic. 

 

Europe_CRE_180_-_BNPPRE_Global_Research_27012022
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