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2024 : Major Turning Point for Real Estate Markets in Europe

DAMA Blog
While 'corrections in real estate values are still possible,' as long as the ECB does not lower its key rates. And provided 'a new shock does not occur,' estimates Henry-Aurélien Natter, Director of Research Europe at Primonial REIM. Some asset classes - notably logistics and residential - could then rebound.

The last months of 2022 were tumultuous for real estate values, with a sudden rise in interest rates. This uncertainty froze the investment market in 2023, with investors taking a wait-and-see approach. However, the end of the historic rise in the ECB's key rates seems to have been reached at the end of last year.

Analysis of market trends:
  • The continuation of repricing in real estate values ​​cannot yet be ruled out, due to liquidity and refinancing issues for certain open-ended real estate funds.
  • Hospitality and healthcare are the most resilient sectors, with a less significant correction compared to other asset classes. In 2023, healthcare real estate attracted €5 billion in capital in Europe, representing a 32% decrease compared to the previous year.
  • Logistics is expected to rebound, with modern warehouses adapted to new business models. Capital invested in logistics was almost identical to that of residential properties in Europe.
  • The office market has split into two, with a clear preference for well-located buildings that meet ESG criteria. All office markets in Europe saw decompression between the end of 4Q 2023 and the end of 2022.
  • Residential real estate recorded a decrease in the annualized pace of housing prices in the eurozone (-1.5% year-on-year), although some markets showed a positive trend throughout the year.

Outlook for 2024:
  • 2024 promises to be a promising year for the hospitality sector, with major events such as the Euro football championship in Germany and the Olympic Games in France. Hotel indicators were on the rise throughout 2023, with average prices and Revenue per Available Room (RevPAR) exceeding end-2019 levels.
  • Logistics is expected to continue attracting investor attention, despite an increase in supply. Rents have been steadily increasing since the beginning of the year, supported by e-commerce growth.
"The residential sector will rebound fairly quickly, especially when the cost of credit eases."

"Logistics is the asset class that has experienced the most significant correction. However, it is already preparing for a rebound phase for the most modern warehouses adapted to new business models. Office and residential properties as a whole also underwent significant repricing in 2023. This was due to demand pressure in tension zones and supply imbalances. But we believe that residential real estate will rebound fairly quickly, especially when the cost of credit eases."

Henry-Aurélien Natter

Director of Research Europe, Primonial REIM

In conclusion, 2024 will be a major turning point for real estate markets in Europe, with opportunities for rebound in some sectors and challenges to overcome in others. The decisions of monetary authorities and the evolution of the economic situation will be crucial in shaping the future of the European real estate market.

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