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With the health crisis affecting countries’ economies differently, what will investment opportunities look like in the future across Europe?


When the Covid-19 pandemic hit Europe earlier in the year, all investment markets were affected, no matter the reaction of each country.

Before this unparalleled event, cross-border investment in real estate had experienced a period of impressive performance. In 2019, foreign capital represented half of commercial real estate investment in Europe and in Q1 of 2020 reached a record level of €39bn, a 71% year-on-year increase. 
From the outbreak of the crisis, and notably the lockdown period, investment stalled, although there have been variations due to location and assets class. Cross-border investment, particularly from outside Europe, has been the most impacted.  With the very cautious and slow opening of borders, and some countries suffering second waves of the crisis, it will take time for investment markets to reach pre-crisis levels. 

How then will investment in real estate fare across different asset classes and countries? 

Offices: what is the impact of remote working?

Office occupational markets have been affected in a similar way to investment markets, with significant drops in take up across the main markets.  However, vacancy levels should not increase substantially due to the strong conditions of the market before the lockdown As such rental levels are not likely to fall significantly. Changes are being experienced as a number of occupiers are reacting to a new work dynamic that favours working from home, and some may scale back their occupational needs.  The question remains as to how permanent this shift will be and if spilt office locations and co-working will be part of a new office based strategy for occupiers and tenants   

As people start to go back to work, activity in the office investment market is picking up, as visiting properties will be easier (virtual visits during lockdown were still possible) and vendors are more willing to put properties on the market.  

During the weeks of lockdown, France and Germany proved notably resilient, with deals still advancing with domestic investors.  The UK experienced a strong ‘Boris bounce’ after the election and greater clarity about Brexit. However, the lockdown has lasted longer than in other countries and with the dominance of foreign investment, this has a significant effect. In other countries such as the CEE, deals have been put on hold as investors view these markets as more volatile. 

As Europe starts to open up, pitching will once again gather speed and vendors will begin to be more active on the market. The likelihood is however, that most will wait until after the summer and see how initial deals currently on the market trade.  

As Europe starts to open up, pitching will once again gather speed and vendors will begin to be more active on the market. The likelihood is however, that most will wait until after the summer and see how initial deals currently on the market trade.

Larry Young
Head of International Investment Group at BNP Paribas Real Estate


With the need for goods to be kept circulating and with consumers favouring online shopping, logistics has widely been viewed as a reliable asset class during the crisis. This means that e-commerce will continue to expand and lending against logistics will be viewed positively, especially for core assets. Despite lending terms being more expensive, because of the stability of logistics, investment will continue to be made in this asset class and as seen over the last few years, demand will still continue to outweigh supply.
Investment deals have moved forward during the crisis and a number of successful sales processes have been carried out, even in markets that had the most severe lockdowns.  

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Retail and Hotels

Retail and hotels have been amongst the asset classes that have suffered the most during the pandemic. For retail, the crisis means the gap between prime and sub-prime assets will become greater, regardless of the segment. Most ongoing deals are currently on hold, and retail REIT’s have seen their share price hit hard. However, footfall has been encouraging in places where lockdown has been lifted and some large investment deals did still move forward during the crisis. Any part of the retail sector linked to food distribution and health has understandably held up well. The retail market was already changing before Covid-19, notably because of e-commerce – the crisis will only increase the speed of this transformation. 

Likewise, for hotels, the pandemic had an immediate effect on the asset class, with tourism all but shutting down across Europe. The market will take time to recover, with business and long distance travel affecting occupancy rates even after hotels re-open. However, if a second wave is avoided and travel starts again, the market should have a more ‘V’ shaped recovery.  The investment market mostly stalled with the exception of some distressed sales.  Despite this, there is still long-term investor demand for this market that we expect to recover in line with the crisis ending. 

What will investment in Europe look like?

Certain assets have been affected by the pandemic more than others. Residential, healthcare, logistics and anything linked to groceries have understandably held up well whilst retail, hotels and office markets have suffered.  Across the world, countries have undergone different experiences linked to the severity of their lockdowns and the predominance of foreign investors.  

Positive signs are that the market is starting up again, and in some markets faster than expected. The next few months are crucial, and as long as we avoid a significant second wave, and global borders are opened up again, real estate will continue to be a resilient asset during this difficult period.

Source: Europe Covid-19 report, BNP Paribas Real Estate