A further rate cut by the European Central Bank helped revive the European commercial real estate investment pipeline and sentiment in the third quarter, with a series of major assets coming to market and renewed investor interest in the retail sector, according to Colliers’ latest EMEA Capital Markets Snapshot (Q3-2024).
A third rate cut decision by the European Central Bank (ECB) in October is likely to boost a market that is backed heavily by institutional finance. In the immediate term, however, Colliers experts said some investors might forgo decisions as they wait to see the impact of further moves by the ECB, Bank of England and US Federal Reserve on pricing.
'There may be a bit of a short term drag in terms of product coming into the market, because people are anticipating that the environment next year will be better than this year, but we are seeing more activity,' said Luke Dawson, head of Global and EMEA Capital Markets for Colliers. 'That includes bigger sales processes, €100 million plus transactions, at relatively advanced stages, including a few portfolios continuing to move forward. Some of those may close by the end of the year.'
Retail finds its footing
While the office sector remains in recovery mode, London, often a leading indicator of Europe’s market, saw a series of major assets come into the market over the quarter. Another evident trend was shopping centres coming back into focus for investors in European commercial real estate.
Amid the massive growth in e-commerce, which has seen substantial capital deployed towards the industrial and logistics assets needed to support it, the strengths of physical shopping malls have been relatively overlooked for years. But according to Colliers, investors have rediscovered the potential of retail assets in recent months.
In September, Nepi Rockcastle acquired a shopping centre in Wroclaw, Poland, for €373 mln, with other large retail deals closing over the quarter in Portugal and Spain.
'The whole rental position for shopping centres has really stabilised, and it's much higher yielding than other segments,' noted Damian Harrington, head of Research, Global Capital Markets & EMEA, Colliers. 'So where these centres are becoming available, investors are snapping them up, for the right reasons.'
The lead times required to close large deals means much of the activity currently underway may only translate into higher volumes in 2025, Colliers experts noted, pointing to a positive outlook for the year ahead.
'We believe Q4 will be busy in terms of processes started, but the flow through in terms of closings is likely six months down the road,' said Dawson.
