EMEA Capital Markets Snapshot | Q1 2024

Europe’s environment for commercial real estate investment saw little change in the first quarter of 2024, with volumes remaining muted as investors pared back expectations that aggressive interest rate cuts would prompt a rapid recovery. However, the buoyant activity in some sectors pointed to continued demand that is set to pick up as more product comes to market and the rate outlook stabilises.

Key Highlights

Demand for industrial & logistics and residential assets continues to outstrip supply in key markets such as the UK and France due to a shortage of new stock, with investors focusing on smaller-ticket (sub-EUR 100 million) deals.

Similar appetite surrounds smaller, value-add office opportunities, which investors see as ripe for ‘brown to green’ or office to residential conversion strategies. It is also important to note that big-ticket office deals have by no means halted completely, with Norway seeing in March its largest single-property transaction since 2020 — the EUR 222 million sale of the award-winning Stortorvet 7 building in Oslo, brokered by Colliers. We expect more large core deals to test the market as the year goes on.

The hospitality sector has emerged as the region’s clear outperformer, as tourist arrivals, occupancy rates and profits in popular leisure destinations like Spain and Italy as well as business capitals like Paris and London meet or exceed pre-pandemic levels.

While the UK remains the world’s largest magnet for international capital — a positive sign for Europe as a whole — we expect the markets with substantial and active sources of domestic capital, such as Spain and Denmark, to fare better than regional peers.

The other clear trend defining the market is the competition for capital. This is driving more developers, investment managers and fund managers to explore new capital sources and structures such as joint ventures, contributing to what might be the most complex capital market situation in a decade.

While this competition may create difficulties, it will also generate opportunities as more groups seek refinancing and pressured, though not distressed, asset sales emerge. This will help dispel some of the uncertainty around pricing and encourage participants with pent-up capital, such as private equity funds, to pursue significant deals.

Download the EMEA Capital Markets Snapshot Q1 / 2024