Savills expects European real estate investment volumes to rebound as the continent's economy recovers, with transaction volume going from the €163 bn forecast for 2023 to €220 bn in 2024.
The global real estate advisor believes that the slight recovery of investment activity will begin in H2 2023, as both lenders and investors adapt to the new environment of higher interest rates, debt costs, and yields.
James Burke, director, European capital markets & global cross border investment at Savills, said: ‘We expect to see more and more investors looking to take advantage of the current environment to harness value upside in the European office market, in particular through sustainability initiatives or by buying from those who have to sell.’
Lydia Brissy, director of European research at Savills, added: ‘History shows that deals pursued during challenging times often yielded superior returns in the long run. This is why we believe retail will continue to fare better than other sectors in 2023.’
Savills expects that retail yields offer a compelling opportunity compared to other asset classes and anticipates further yield expansion in the sector, especially for shopping centres and retail warehouses.
It forecasts that the European average prime shopping centre yield, which was 5.9% in Q2 2023 (+55 basis points year-on-year), will reach 6.1% at year-end.
In the same period, the European average prime retail warehouse should go from 5.5% (+58 basis points up on Q2 2022) to 5.7% at year-end.
