Results from a muted fourth quarter confirmed that European commercial real estate investment in 2023 slowed to the lowest in a decade. However, with financial conditions stabilising and price adjustments steadily progressing, signs of increased activity should translate into higher volumes in the second half of 2024, according to our latest Capital Markets Snapshot for EMEA.
Here are our 2023 reflections and 2024 predictions:
- 2023 saw a decade-low in real estate investment volumes across major European markets, with volumes down by circa 50% overall, as capital values reset, and market uncertainty reduced the deal flow.
- That said, there were some bright spots. More opportunities and realistic pricing levels are coming to the market as we commence 2024.
- Spain and Portugal benefited from the inflow of private domestic and Latin American investors, which buoyed activity in 2023.
- Demand for prime London assets remained strong, with private capital once again being the most active. This was despite UK transaction volumes failing to cross the £40 bn mark for the first time since the GFC.
- We expect private capital and family offices to be at the forefront of buying activity, reflected in a risk-on attitude by investors. Value-add, opportunistic and development-focused capital is set to be most prominent in the year ahead. In many ways, this approach is symbiotic with the shift in brown-to-green and develop-to-core strategies of investors encompassing ESG and energy efficiency requirements into assets.
- Investor interest in alternative/specialized, and contra-cyclical assets is expanding, notably for purpose-built student accommodation (PBSA), data centre and life science assets.
- While Q1 is likely to remain subdued, a rebound in deals will likely gain momentum in the second half of 2024, as pricing stabilises and interest rate reductions are more probable.