Europe - CRE 180 report - April 2024

The global economic activity strengthens 

• The global economy has been resilient and should continue to grow, albeit at a slower pace than last year.
• We expect the global GDP growth to reach +2.9%, with an acceleration for advanced economies and a modest slowdown in emerging markets.
• Economic activity in the Eurozone is expected to gradually pick up over the course of 2024, buoyed by improving household purchasing power and falling interest rates.

Core inflation now on a downward path

• Despite the rebound in the United States, inflation continues overall to slow in the G7 countries and in the euro area as a whole.
•  inflation continues to decline in the euro area, with inflation expected to fall temporarily below 2% in the second quarter, in line with our forecast.

Investment decline slowing down

• €32.7bn were invested in Europe over Q1 2024 which represents a 10% decrease versus Q1 2023. This is the lowest level for a Q1 since 2011. Nevertheless, on a rolling-year basis, the decline between Q1 2024 and Q4 2023 is only -3%, showing the first signs of stabilization.
• Offices (-27%) and retail (-21%) recorded the strongest declines. Not all asset classes experienced reduction. Hotel investment (+2%) is ahead showing improvement in volumes

Q1 2024 marked by yield stabilisation

• 2023 will be regarded as the year of yield decompression with European markets characterized by protracted price discovery processes across all asset types.
• Over Q1 2024, prime yields in every sector seem to stabilize in most European markets.

Office: A modest start to 2024

• 1.82 m sqm was transacted over Q1 24 in the 18 main European markets, decreasing by 5% vs Q1 23. Quarterly volumes stood at 17% below their Q1 10-year average.
• While some markets have experienced a new decline in volumes, take-up gained traction in many markets.

The flight to quality continues

• While hybrid work models are here to stay, workplace plays a key role in attracting and retaining talent, both in terms of space quality and location. Demand is also high for energy-efficient and sustainable buildings. 
• These increasing quality requirements drive values up for modern buildings located in the most established districts.