Has the European investment market turned a corner?
According to Savills latest research, European real estate investment volumes are forecast to reach approximately €34bn in Q1 2024.
Although still declining, the investment curve is showing signs of stabilisation. In the first quarter of this year, investment volumes for the last four quarters stand at €144bn, only slightly down from the previous four quarters at €149bn.
Core markets, such as the UK, Germany and France, are forecasting the lowest decrease in Q1 investment volumes, only 5% down on Q1 2023, as pricing in these markets has adjusted particularly fast.
Tristam Larder, head of european capital markets at Savills, says: “As the gap in buyer and seller price expectations is beginning to close, we anticipate seeing a gradual resurgence in investment activity from H2 2024 onwards. Logistics and multifamily will remain the preferred asset classes in Europe this year, although there is a growing appetite for retail properties and given recent price adjustments, we are also seeing more and more investors enquire about offices.”
Savills forecasts that year end investment volumes for Europe will reach €177-182 billion. This would mark a considerable rebound in investment volumes, up by 19-22% on the €149bn recorded for 2023.
Lydia Brissy, director European Research at Savills, says: “Central and Eastern Europe and the Nordics are anticipated to see the largest annual growth rates in investment volumes, with increases of 28-40% and 17-35% expected at year-end, respectively, on the back of relatively low volumes recorded in 2023. Southern Europe is expected to bounce back by 12-21%, while the core markets are forecast to see an annual increase of 16-19% and the rest of Western Europe a 15-17% increase in year-end investment volumes.”
The ability to achieve desirable yields on investments has been very complex in 2023, leading to strong outward yield movement across all real estate sectors, says Savills. However, the international real estate advisor believes that the expected decline in central bank rates will provide a boost to investment activity later this year and will generate a stabilisation of yields from H2 2024 onwards.
Georgia Ferris, european research analyst at Savills, says: “Multifamily and supermarkets are the two sectors with the highest number of markets forecasting yields hardening by -26/50 bps over the next 12 months, supported by the positive sentiment around the living sector and essential food stores at present.”
