European commercial real estate markets are showing the first signs of recovery, favoured by falling inflation rates and interest rate cuts by the European Central Bank. Current market data shows an increase in transaction volumes and a stabilisation of prices across the office, retail, logistics and hotel asset classes.
After real estate investors waited a long time for good news, there are now the first signs of a recovery. Since the beginning of the year, the sentiment indicators determined by surveys have shown a steady improvement. This is due in particular to falling inflation rates and the first interest rate moves by the European Central Bank. The latest figures for the second quarter now show that this positive sentiment is also visible in market reporting.
The volume of real estate transactions is rising again.
The volume of real estate transactions on the investment market has risen again and is around 12 per cent higher than in the previous quarter. In detail, the increase in the transaction volume can be seen across the office, retail, logistics and hotel usage types. The hotel sector is slightly weaker with an increase of 5.5 per cent, as a market recovery was already observed here in mid-2023. Prices for commercial properties stabilised on almost all markets in the second quarter, with only moderate value adjustments in isolated cases.
The real estate transaction volume increased by around 12% in the office, retail, logistics and hotel asset classes compared to the second quarter of 2024.
Due to the economic recovery in Europe and the predicted further interest rate cuts by the European Central Bank, demand for commercial properties will continue to rise in the second half of 2024. This development should have a positive impact on price trends in the coming year at the latest. The market turnaround is therefore within reach.
The author: Olaf Janßen, Head of Real Estate Research at Union Investment
