Tide is turning for commercial real estate in…


As inflation cools from 2022 peaks and central banks approach the end of their rate hike cycles, the real estate services firm forecasts that the property sector will bottom out, with markets and sectors moving into a more positive trajectory at different paces behind the headline figures.
Sukhdeep Dillon, head of EMEA Forecasting, Cushman & Wakefield, said: ‘As we look ahead to 2024, our forecasts indicate commercial real estate markets are approaching an inflection point after a turbulent period. Though economic growth remains subdued for now, the tide seems poised to turn.’
While risks like persistent inflation remain, baseline forecasts point to measured expansion rather than recession in Europe, he added. ‘The diminished level of transactions in numerous markets has led to a slower phase of price determination, particularly for the office sector. But we are beginning to witness swifter price adjustments taking place in the more liquid markets, such as in the UK and the Netherlands. As rate hikes end and cuts commence around Q3 2024, we expect to see a bottoming out for valuations.’
2024 is shaping up as the early stages of recovery. Dillon: ‘Investors with a medium-term outlook should feel increasingly confident deploying capital as the market stabilises. The challenges of the past 18 months will give way to renewed optimism by this time next year. Nevertheless, it is paramount to have a thorough understanding of the sector to capitalise on opportunities for both occupiers and investors.’
Offices: quality over quantity
Despite overall reduced demand across the European office market, over half of leasing is now for Grade A space. As companies embrace hybrid models with core in-office days, buildings with the trifecta of good location, excellent facilities, and sustainable credentials continue to be favoured, highlighting the divergence towards quality that has occurred since 2020.
Looking to the future, space needs to continue to evolve, and flexibility remains paramount. In turn, this has seen an uptick in ‘option space’ lease agreements, with over a third of London leases over 50,000 ft2 signed between 2020 and H1 2023 having expansion options.
Over the coming years, buildings with strong ESG credentials will become the standard, not the exception. However, with 76% of offices potentially obsolete by 2030 on ESG grounds, the current still-resilient leasing demand for quality space, means that there exists a value-add for investors willing to transform offices to match the new paradigm.
Logistics: 2024 take-up expected to reach pre-pandemic levels
After exceptional growth during the pandemic, European logistics occupier activity notably decelerated in 2023, with economic uncertainty prompting caution from businesses. However, the ongoing retail shift to online, nearshoring of manufacturing, and demand for sustainable spaces will continue to fuel medium-to-long-term demand, and 2024 take-up volumes are expected to reach pre-pandemic levels. The expectation of a more meaningful recovery in investment activity is tied to overall confidence in the sector with investors having earmarked capital for investment in logistics and industrial assets based on value-added or opportunistic approaches.
Retail: robust demand for prime assets
Retailers face ongoing economic challenges with stagnant sales volumes not expected to recover until late 2024. As consumers grapple with higher essential costs, discretionary spending has been reduced and tourism still lags pre-pandemic levels, especially from big-spending long-haul visitors.
However, despite headwinds, retailers continue to focus on creating appealing physical spaces, positioned in prime locations, and favouring immersive experiences. It is this emphasis on experiential brand-building that has seen fashion retailers drive 30% of lettings across Europe since 2021. Consequentially, this shift in retailer focus has seen retail rents rebound, sitting either at or above pre-2020 levels for quality engaging, customer-centric spots.
Throughout 2024, capital will primarily orientate towards “essential” assets in robust catchments, directing investment to value-add pricing and strategy. Effective asset management, community engagement, and sustainability improvements will remain crucial to enhancing value. Whilst investors recognise positive occupancy patterns, they remain wary of economic obstacles affecting consumers and retailers and primarily are directing attention towards prime assets.
Living: sustained demand
Non-cyclical demographic factors including an ageing population, declining home-ownership rates, and urbanisation continue to support robust demand and lend to the supply gap that is struggling to keep pace across senior living, private rentals, and student accommodation. While rising construction costs have hampered development, forecasts suggest easing inflation in 2024 could mark a turning point.
Though investment declined in 2023 mirroring other sectors, living transactions consistently comprise 20-25% of volumes in EMEA. After yield expansion in 2023, further outward shifts are expected in early 2024 before values and volumes rebound more firmly from mid-2024 as markets stabilise.

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