Real Estate
European CRE: Uncertainty Extends the Opportunity
Europe’s real estate recovery has been postponed, as Middle East tensions revive inflation anxieties. However, any future ECB rate hikes are likely to be much more modest this time. Even so, the market remains resilient, with chronic shortages of modern space set to worsen as development activity continues to fall.
Executive Summary
ECONOMY
- The conflict in Iran adds uncertainty to the outlook, with the ultimate impact determined by its duration.
- Rising energy prices nudged March inflation higher, with two rate rises now in play.
- The European Central Bank (ECB) faces the challenge of carefully balancing slower growth and higher prices.
PROPERTY MARKETS
- We do not expect significant value shifts, as the Commercial Real Estate (CRE) sector has not yet rebounded, rents are increasing and yield spreads remain adequate.
- Despite a clouded macro outlook, CRE resilience exists in the form of modern stock shortages, an easing development pipeline and expanding rents.
- Renewed uncertainty will likely moderate the pace of the transaction volumes recovery, but also extend the opportunity to acquire at attractive pricing.
- Current circumstances yet again reinforce the importance of investing structurally, aligning with enduring trends such as demographics, technology and ESG, especially for those seeking inflation protection.
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