Economic resilience is fading
After a slightly positive first half-year, eurozone activity is likely to stall in the second half-year.
The labour market should also lose momentum. However, the extent of this decline and an increase in the unemployment rate should be relatively limited given persistent recruitment difficulties.
Investment still plummeting
All asset classes experienced a strong reduction. Logistics (-58%) was the most affected as prices were already expensive before problems arose. Offices (-62%) suffered as well as complicated pricing adds difficulties to a sector where structural change seems to be underway. Hotels (-26%) and retail (-43%) incurred the least declines.
Office: Letting activity is remaining subdued
2023 letting activity is struggling to regain the volumes seen in 2022 when take-up returned to its long-term average. Take-up after 9 months shrank 22% relative to 2022. This decline is mostly due to a reduced number of very large transactions. Occupiers are looking for space optimization to meet hybrid working patterns and reduce costs.
Low momentum for European logistics
The logistics market in Europe decreased significantly in 2023 as the manufacturing sector feels the effect of slower demand and new orders weakening. Yet market fundamentals remain healthy as low vacancy rates and limited land availability continue to push rents up.
Yield decompression is now slowing down in most European countries. This could unlock investment activity in the next quarters.
Retail: a mixed picture for the market
Retail is affected by a decrease in investment volume but is gaining traction in market share. Retail fundamentals resist: global tourism on track to return to pre-pandemic levels. International tourists' arrivals were strong in Europe, with the Southern/Mediterranean region leading the recovery, boosting both footfall and retail sales.
Residential: a fading cycle
Residential investment plummeted by 54% in the 9 months of 2023 y/y. Housing transaction volume dropped by 19% driven by tight credit conditions. As results, house prices in the Europe continue to fall i.e., -1.1% vs the last year. Rental values are still booming owing to the shift in the monetary policy and the drop of listed property put up for rents.
