2024 Winter Issue of Urban Land - 88

Emerging Trends:
Europe
Possible Eurozone slowdown
may guide 2024 investment
Sharply Slower economic growth, inflation, and
high interest rates will continue to cast a shadow
over European real estate investment in 2024.
Aligning strategies and expectations to fit a more
challenging macro-environment is one of the key
themes in the latest Emerging Trends in Real Estate
forecast for Europe. At the same time, real estate
market participants are giving careful thought to
evolution and longer-term trends occurring within
the real estate universe that are influencing portfolio
strategy. Some of the topics at the forefront are the
expansion into alternative sectors, colocation, and a
greater focus on sustainable assets and social impact.
Most forecasts for the UK and Eurozone suggest
a sluggish economy at best in 2024, with recession
still a realistic concern. " Everyone seems to think we'll
avoid recession. I'm not so sure. I see further negative
news coming, especially for the development
industry, " says a European CEO of a global research
group who was interviewed for the report. " Even if
we evade recession, where is the growth going to
come from? "
Economic issues alongside geopolitical volatility
and increasing policy and regulatory burdens are
taking a toll on transaction activity and investor
sentiment. Europe's real estate industry has endured
record-low transactions over the last 18 months.
In one of the most notable survey findings, as
many as three-quarters of respondents believe that
current valuations " do not accurately reflect " all the
challenges and opportunities in real estate, whether
it is climate change, social impact, or even occupier
demand fundamentals.
In the midst of these challenges, investors are
proceeding carefully on how and where to deploy
capital. London and Paris remain as the top two
places, respectively, in city rankings. Views are
probably influenced by the premium investors are
putting on perceived liquidity. Market fundamentals
also have remained resilient, though clear bifurcation
is occurring in the office sector. Notably, Madrid
rose to the number three spot, up from fourth last
year due, in part, to its population growth, economic
growth, and strong tourism.
Alternative sectors
Most European investors still take a sector-based
approach to real estate. When asked about their
priorities for allocating capital, 71 percent of
respondents to this year's survey rank doing so
among their top three criteria. However, more
progressive real estate investors are increasingly
basing investment decisions on megatrends, such as
demographic change, the need to decarbonize the
economy, and digitization.
As a result, they are venturing into sectors
beyond the traditional " big three " of offices, retail,
and logistics. The top five rankings are once again
dominated by niche operational sectors-new energy
infrastructure, data centers, health care, student
housing, and retirement/assisted living.
REAL ESTATE BUSINESS ISSUES CAUSING CONCERN IN 2024
2% 9%
Figure 1-4 Real estate business issues causing concern in 2024
Construction costs and resource availability
Capex requirements
Environmental sustainability/decarbonisation requirements
Market liquidity issues
Availability of (re)finance
Increased regulation (national/international)
Cap rate expansion
Asset obsolescence
Availability of suitable assets/land for acquisition and development
Covenant and loan servicing issues for existing loans
10%
3% 8%
4% 13%
3% 11%
5% 11%
3% 13%
3% 10%
6%
7%
7%
18%
20%
18%
Not at all concerned
22%
17%
21%
19%
22%
32%
23%
24%
26%
Not very concerned
Source: Emerging Trends Europe survey 2024
88
URBAN LAND WINTER 202 4
41%
41%
39%
35%
33%
35%
Neither/nor
52%
48%
42%
48%
Overall % concerned
2024 2023 2022
27%
19%
25%
17%
24%
22%
16%
19%
16%
14%
Somewhat concerned
79% 92% -
67% 53% -
67% 55% -
65% -
-
65% 53% 30%
63% 51% -
55% 53% -
54% 38% 50%
49% 48% 66%
49% 30% 19%
Very concerned
2024 Winter Issue of Urban Land

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