European real estate market is navigating inflection point
Optimism is based on the strength of underlying occupier demand.
The changing macro background to real estate has taken a heavy toll on investor sentiment, but it is not fully felt in occupier markets, according to "Emerging Trends in Real Estate Europe, 2024" report by Urban Land Institute (ULI) and PwC.
"Europe’s real estate leaders are slowly coming to terms with a market burdened by inflationary pressures and increasing interest rates while addressing the ever-growing commitments around environmental, social and governance (ESG) issues. Sentiment is inevitably clouded by the geopolitical backdrop to business and investment, not least the devastating crisis in Israel and Gaza, although the war in Ukraine is still very much front of mind.
Much of the optimism among those interviewed is based on the strength of underlying occupier demand.
Real estate with new energy infrastructure is the sector that offers the greatest overall prospects for investment, growth and high returns, while the depreciation of certain asset classes – that started as early as 2023 – continues to be a concern a year later.
This particular market segment offers the greatest overall prospects for investment, growth and rents, and for many, the combination of decarbonisation and rising energy prices only boosts this sector's results.
The top-ranked industries for another year are those that support uses that sustain global trends such as climate change, information technology, demographics and urbanization. This is followed by logistics and various forms of accommodation, which offer similar performances. According to this year's research, ESG can help open up a new world of potential investment products including renewable energy batteries, solar parks, electric vehicle parking and charging.
The impact of hybrid working on the office
sector remains the key issue for many
real estate professionals, but little hard
evidence has yet emerged as to how the trend
will ultimately play out.
“Demand for flexible, sustainable offices is going
to increase, and the supply is non-existent.”
Consequently, a number of interviewees are
pursuing “brown to green” strategies, improving
old buildings in the most desirable city centre
locations, to meet demand.
Regarding the investment prospects, in the 5 highest places among the cities London and Paris, Madrid, Berlin, while in fifth place is Amsterdam. In third place, Madrid stands out for its seemingly inexorable rise from sixth in 2022 and fourth last year.
Madrid is especially considered for 2024 as one of the most attractive investment destinations in Europe, because it is steadily increasing its population, attracting foreign nationalities, students and increased tourism volume.
Athens ranks 23rd in Europe in terms of real estate investment prospects for 2024, out of a total of 30 European megacities, that stand still at their position as of a year ago.