Europe - CRE 360 report - May 2024

The global economic activity strengthens 

• The global economy has been resilient and should continue to grow, albeit at a slower pace than last year.
• We expect the global GDP growth to reach +2.9%, with an acceleration for advanced economies and a modest slowdown in emerging markets.
• Economic activity in the Eurozone is expected to gradually pick up over the course of 2024, buoyed by improving household purchasing power and falling interest rates.

Investment decline slowing down

• €32.7bn were invested in Europe over Q1 2024 which represents a 10% decrease versus Q1 2023. This is the lowest level for a Q1 since 2011. Nevertheless, on a rolling-year basis, the decline between Q1 2024 and Q4 2023 is only -3%, showing the first signs of stabilization.
• Offices (-27%) and retail (-21%) recorded the strongest declines. Hotel investment (+2%) is ahead showing improvement in volumes;

Office: A modest start to 2024

• 1.82 m sqm was transacted over Q1 24 in the 18 main European markets, decreasing by 5% vs Q1 23. Quarterly volumes stood at 17% below their Q1 10-year average.
• While some markets have experienced a new decline in volumes, take-up gained traction in many markets.

Low momentum for European logistics

• Take-up decreased by 25% in Q1 2024 across the leading European countries. The lack of new developments remains supportive of rental growth in prime sectors although weaker demand offsets its momentum.
• Industrial and logistics investment hit a low point in Q1 2024, decreasing by 4% in Europe compared to Q1 2023. It is expected to pick up gradually throughout the year. Yield decompression is effectively drawing to a close and stabilisation is expected in the coming 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 Q1 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. 

Residential: a consolidation phase?

• Residential investment declined by 25% in Q1 2024 y/y. Housing transaction volume dropped by 15% in 2023 driven by tight credit conditions and the decline in mortgage lending. 
• House prices in Europe are entering in a consolidation phase +0.3% in 2023 vs last year. On the contrary, rental values are still booming, +7.1% in Q4 2023 y/y, owing to the shift in the monetary policy and the drop of listed property put up for rent.