Consulting-portfolio

European Real Estate Market Outlook 2024

The year 2023 witnessed sluggish economic growth across much of Europe, with households and businesses grappling with the

The year 2023 witnessed sluggish economic growth across much of Europe, with households and businesses grappling with the impact of heightened inflation and a significant cycle of interest rate hikes. Consequently, property investment activity waned due to similar factors. However, what lies ahead for 2024?

Forecasts indicate another year of tepid growth, albeit slightly stronger than the previous one. Nevertheless, risks remain tilted towards the downside, primarily revolving around geopolitical tensions and persistent core inflation. The trajectory of policy interest rates suggests they may have reached their peak, and inflation is expected to gradually decline throughout the year. Since October, long-term interest rates have started to decline, with further moderate decreases projected for 2024.

Given this context, the outlook for property investment appears to be improving. Property values seem poised to reach their lowest point in 2024, and as values stabilize, there will likely be a gradual alignment of price expectations between buyers and sellers. Investment volumes are anticipated to increase by approximately 10% compared to 2023.

Occupier markets, on the other hand, will present a mixed scenario, characterized by increasing divergence between prime assets and others. Although office leasing activity is expected to rebound, the pace of recovery will be sluggish. Demand for logistics spaces is projected to taper off from its previous peak levels, while in the retail sector, improved consumer fundamentals are anticipated to boost foot traffic and sales figures. In the residential sector, persistent undersupply challenges and robust occupier demand are likely to persist. Similar imbalances between demand and supply are expected in other sectors such as hotels and data centers.

Furthermore, sustainability considerations are poised to exert a growing influence on real estate decisions across all sectors. Various stakeholders in the market will intensify their efforts to align with their environmental, social, and governance (ESG) agendas, driving a heightened quest for better data on the costs and benefits associated with sustainability initiatives.

information taken from www.cbre.com