In the third quarter, European real estate investment broadly recovered to pre-pandemic levels. The Barings Real Estate team weighs in.
- High-frequency business surveys softened, with supply side issues now impacting activity.
- Persistent bottlenecks and rising energy prices have driven stronger-than-expected inflation, but we think these pressures should subside.
- While the risk of an early QE reverse manoeuver has risen, Oxford Economics maintains their expectation that policy rates will remain on hold through to 2025.
- Commercial property investment volumes appear to have recovered to pre-pandemic levels.
- Residential and logistics volumes have increased, but offices remain the most-traded sector.
- Prime yield trends are following the longer-term structural drivers: yields on industrials and e-commerce resilient supermarkets have compressed; prime office yields edged slightly lower in some locations; and most retail yields continued to unwind.
- Office vacancy increases are slowing and lettings activity is now beginning to revive.
- While prime retail rents are showing signs of stabilizing, structural headwinds remain.
- Industrial occupier markets continue to break records.