Europe CRE 360 report - May 2022
Multiple shocks are hitting the economy
Many factors are testing the resilience of the global economy: the Chinese response to rising Covid-19 infections; the war in Ukraine; the increase of commodity prices and the tightening in US monetary policy. The significant carry-over effect from last year’s growth is supporting the outlook for this year.
Investment back to pre Covid-19 levels
€63.2bn were invested in Europe in Q1 2022, which represents a +28% increase vs Q1 2021. This has been the second best result for a Q1 since 2020. Offices (+60%), hotels (+33%), retail (+26%) showed significant improvement as well as logistics to a lesser extent (+10%).
Office: buoyant start to the year
Take-up at the end of Q1 2022 recorded a significant increase (+43%) compared to last year with 2,7 million sqm transacted. Letting activity is pursuing its path to recovery and quarterly volumes have returned to long-term averages.
An all-time high for logistics investment
Market fundamentals are healthy underpinned by strong demand boosted by e-commerce. Low vacancy rates and limited land availability contribute to rental growth. Investment is setting a new record maintaining strong share on other assets. Yield compression on prime assets is showing signs of slowdown.
The resurgence of the retail industry
Retail investment saw a significant increase over the past 12 months, due to the recovery of retail activity. Q1 2022 was particularly dynamic in France and Poland. Footfall has improved in every European cities, and many retailers reported an increase in their turnover. However, this recovery could be moderate as the sector is exposed to various challenges.
Residential: from alternative to mainstream
Soaring house prices (+10% vs Q4 2020) driven by cheap financial conditions, high saving rates and shift in housing demand. Rental values are bouncing back due to the drop in supply as health restriction eased. High investors demand continue to compress residential yields and increase demand for BTR products.
