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What is the economic outlook of the real estate market at the start of 2022?

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Growth in the Eurozone is beginning to normalise, thanks to improvements in the labour market and wage growth speeding up.

Commercial real estate investment: mixed results across Europe

Investment in commercial real estate investment in Europe reached €272.7bn in 2021, meaning that a 14% increase was achieved from 2020.  Thanks to the positive effects of large-scale vaccination campaigns that governments have initiated and a summer lull in transmissions, countries have been able to take control of the situation, which has had a positive effect on investment volumes. 

The UK, Germany, Sweden and Spain have in particular benefitted from strong commercial real estate investment. However the picture is not uniform across the continent as France, the Netherlands and Belgium were still experiencing investment levels below those of 2020. 

Logistics has in particular benefited from this upward growth in investment, whilst offices and hotels have followed closely behind. Retail however continues to see a decrease.

Offices Markets in 2021

At the end of 2021, take-up rose significantly by 27%, meaning that over 10 million m2 more was taken up in the year compared to 2020.

Across Europe, most markets have seen positive rebounds in volumes including Barcelona (+85%), Central London and Brussels (+46%) and Central Paris (+36%).

With 2021 demonstrating a major step in the road to recovery for offices, the predictions for 2022 are strong with volumes increasing across major European cities such as London, Dublin and Luxembourg. There will however still be a gap between 2022 and post crisis levels.

Logistics continues to perform solidly

Logistics have continued to perform under healthy market fundamentals, helped in part by strong economic growth, low vacancy rates and the boost of e-commerce. Investment in logistics has set new records in comparison to other asset types and there has been more and more aggressive pricing on prime products.

As ever, e-commerce is continuing to drive logistics forward and as such the need to improve supply chain disruptions and move goods faster remains a key challenge. Space is also more and more sought after, as companies onshore greater amounts of their manufacturing processes, meaning that there is increased demand for long-term industrial space.

Retail is beginning to see improvement

Whilst retail has suffered from the various lockdowns across Europe and the rise of e-commerce, with restrictions easing there has been a renewed interest in this asset class, and footfall across major European cities has risen. Investors are seizing the opportunity and becoming once again interested in the benefit of retail, seizing opportunities notably in shopping centres and the high street.

Read the full Europe CRE 360 report here

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