Business confidence is slowing
Business activity in the Euro area is still high but growth is already slowing and may remain low for the rest of the year. Worries about the outlook are rising due the combination of high inflation, geopolitical uncertainties and monetary tightening.
More aggressive monetary policy
Following inflationary pressure, the main Central Banks increased their rates. The goal is to achieve a soft landing by slowing the economy enough for inflation to resume a downward trajectory. Government bonds are now reflecting the prospect of monetary policy tightening, and sovereign spreads widened significantly in Europe in June.
Investment maybe slowing down
€128.1bn was invested in Europe in H1 2022, which represents a +8% increase vs H1 2021. This is the second best result for a Q1 after Q1 2020. The main markets started to slow in Q2 2022 though, hit by a combination of geopolitical uncertainties and in particular economic troubles.
Yields are stable in Most markets
Reactivation of the market in 2021 unfroze the pricing process, resulting in renewed yield compression for offices. However, this dynamic may be changing because of changes in the financial backdrop caused by persistent inflation. Prime retail yields remain frozen in most cities while Prime logistics yield compression may have come to a halt.
Office: a solid H1 for letting activity
5,6 million sqm was taken-up in H1 2022 in Europe’s 25 main markets, sharply increasing compared to the same period last year (+41%). Most of markets surpassed long-term H1 average driven by a strong post-crisis demand.
Prime rents are growing again
Having sustained value over the crisis period, prime office rents in the key cities are now growing again. Greater demand for high quality buildings in the most sought-after districts drives rental values up.