Altus Group’s Q4 2024 Pan-European dataset analysis reveals a positive shift in European commercial property values, with a 0.63% increase in Q3 2024. This marks the first quarterly rise in two years, ending a period of consecutive value declines that totaled 22.5%.
The positive movement was driven by cashflow gains across most sectors, excluding offices, and a reduction in projected capitalization rates in valuations. While the European Central Bank’s third interest rate cut this year continued to push valuation yields upwards, exerting downward pressure on values, the impact of pure pricing adjustments has lessened, suggesting a stabilization in the market.
Despite this positive trend, UK offices experienced a significant decline of 2.6%, bucking the overall positive trend.
These findings are based on an aggregate dataset of Core Pan-European Open Ended Diversified Funds, with a total market value of €29 bn, covering 17 countries.
Office values rebounded from last quarter’s decline, registering a 0.5% increase. However, cashflow growth was hampered by increased rental concessions and rising operating expenses, resulting in a -0.2% impact on value growth. The market remains fragmented, with Sweden experiencing a 4.9% value increase, while the UK saw a further 2.6% decline, primarily due to rising yields and low rental rates.
Retail emerged as a standout performer, with positive appreciation across all sub-sectors, driven by strong investor sentiment towards shopping centers and supermarkets. Overall, retail values increased by 1.26% during the quarter.
Above-average cashflow growth of 0.75% led to a 0.53% overall value increase in the residential sector. The Netherlands (0.9%), Germany (0.3%), and Denmark (0.7%) saw significant cashflow gains contributing to the value growth.
Industrial property saw a modest 0.4% increase in Q3, the lowest growth rate among the four main sectors. Sweden (1.3%), Germany (1.0%), and the Netherlands (0.9%) reported the largest gains.
Hotels enjoyed a strong quarter, with investor interest driving values higher than the overall average.
Phil Tily, senior VP at Altus Group, said: ‘The third quarter marked the first time in two years that the movement in property values across the Pan-European valuation dataset turned positive. We are seeing green shoots emerge across all main property sectors which, combined with last week’s second European Central Bank rate cut this year, points to greater stability ahead.’
