The first quarter of 2024 saw weak activity in European commercial property markets as hopes of an aggressive rate cut rates declined and investors remained passive. However, a steady stream of smaller deals and even some large-scale transactions indicate a healthy residual appetite, said a report by consultancy firm Colliers.
Investors in the residential and industrial and logistics sectors were relatively active, with demand generally outstripping supply in major markets such as France and the UK, and the market almost devoid of new product. In Denmark, the company advised on the sale of a portfolio of 14 light industrial and warehouse assets in the Copenhagen area, and in Belgium, it advised on the sale and leaseback of the key logistics center Hoogveld 50A in Dendermonde. Activity is largely limited to transactions worth less than EUR 100 million, and as their volume increases, there is a decline, both in supply and in the number of potential buyers.
Hotels benefit from tourism recovery
The hotel sector is performing well against others, as recovering visitor numbers, employment and profitability drive investor interest in this type of asset in holiday destinations such as Spain and Italy. This continues the trend from 2023, when Spain recorded its second highest annual hotel investment levels to date, amounting to almost €4.3 billion, driven by investors from Asia and the Middle East. Properties in Europe's main business centers such as Paris and London are also attracting interest.
"The upside of the pandemic from a hospitality perspective has been operational efficiency and that is starting to feed into hotel bottom lines," noted Luke Dawson, Head of Capital Markets at Colliers EMEA. "Investors view the sector as an attractive growth opportunity over the next few years based on its fundamentals, and we strongly believe that it will continue to expand its market share in total investment volume."
A large-scale deal in Norway signals an increase in activity in the office segment
Although investment sentiment in the office segment remains unfavorable, some major deals were completed during the quarter. These include Colliers' mediation of the iconic Stortorvet 7 building in central Oslo, Norway, for over EUR 222m, which Colliers says signals further deals to come. "The second half of this year will see further major sales of key office assets, which will be an important indicator of the direction of market and price development," Dawson continued.
Competition for capital intensifies
Another trend dominating the regional market is the increasing competition for capital, with many different groups looking to raise funds or recapitalize while potential equity owners remain few. This fundamental imbalance is forcing more and more investors, investment and fund managers to explore joint ventures and other new structures to meet financing needs. "Analyzing the past decade, the complexity of deal structures in European capital markets has probably reached an all-time high,", says Luke Dawson.
You can see detailed statistics on average property prices in Bulgaria by cities and neighborhoods HERE