As we approach the end of 2024, the European real estate market shows signs of revitalisation after a sluggish start. Recent data and market activities suggest a more optimistic outlook for the final quarter.
According to CBRE, European real estate investment volumes have shown a positive trend for the first time since 2022, totaling €182 billion over the past 12 months. There was a significant 13% increase in the first three quarters of 2024 compared to the same period the previous year. The Living, Industrial, and hotel sectors led this recovery with strong performance.
Savills reports that European real estate investment volumes are forecast to reach approximately €37.1 billion in Q3 2024, a 15% increase on Q3 2023 figures. This brings total investment volumes for the year to €113.3 billion, representing a 5% rise on last year.
In the UK, the real estate market is showing mixed signals. CBRE notes that investment in UK commercial real estate over the year has increased by 6.9% relative to 2023. However, transaction volumes in Q3 2024 have fallen compared to the previous quarter. The Office sector attracted the highest investment during the quarter, followed by the Living and Industrial sectors.
The residential sector is experiencing a cautious outlook. A survey by the Royal Institution of Chartered Surveyors (RICS) indicates that 33% of agents expect to sell more homes in 2025 than in 2024, marking the weakest optimism since April. Despite rising house prices across the UK, including Northern Ireland, the northwest and northeast of England, and London, the pipeline for new listings may level off, potentially driving prices higher.
The European Central Bank (ECB) reduced its deposit facility rate by 25 basis points on 12 September 2024, lowering it to 3.5%. This monetary policy adjustment has positively influenced investor sentiment within the Eurozone, fostering increased activity in real estate markets across Germany, France, and other northern European countries.
Private investors from Germany, Israel, France, and Spain have become notably active, focusing on acquiring office properties throughout Western Europe.
U.S. private equity firms are intensifying their investments in European real estate, particularly targeting office assets in London and Dublin. Their strategy aims to leverage potential rental growth and capitalize on yield decompression within these sectors.
While the European real estate market is showing signs of recovery, the pace varies across regions and sectors. The UK market, in particular, presents a mixed picture with both opportunities and challenges. Investors are advised to stay informed and consider sector-specific dynamics when making investment decisions in this evolving landscape.
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