Iryna Pylypchuk, director of research & market information at INREV, has said its Consensus Indicator suggests the market is close to bottoming out.
The latest Inrev Consensus Indicator showed a second consecutive improvement with a headline reading of 53.6.
The Investment Liquidity sub indicator rose significantly to 54.1 up from 46.2 in March 2024. This signals a notable shift in sentiment and indicates that transaction activity ought to pick up in the coming quarters. Some 80% of respondents expect income return to be the key driver of near-term performance, the highest share since the start of the series in March 2022.
Pylypchuk said: 'European real estate has seen significant levels of repricing, and we see the first notable shifts in sentiment pointing to the fact that the market is close to bottoming out.'
However, the association is cautious given the recent signals from the European Central Bank (ECB).
She said: 'It’s important to recognise that we are not out of the woods yet and that the recovery will be very nuanced.'
'The latest ECB cut should not be considered a precursor to further cuts in September and/or December. The next cycle will see a return to fundamentals as the era of low yields driven by artificially low interest rates is over. Outperformance will be focused on stock selection and the timing of the market entry. The speed and nature of recovery will vary notably across different markets and sectors. It will certainly not be a linear journey.'
All five sub indicators have improved since March, with the exception of leasing and operations, which declined from 60.2 in March to 58.9 in June. This decline is attributable to a slight retraction in the growth of effective rents and occupancy rates. Despite the decline, leasing & operations remains the strongest sub indicator, but the figures highlight the growing bifurcation in the occupier markets. The latest results reveal that close to 15% of aggregate portfolios experiencing a decline in rents, against 56% with an overall improvement.
Offices remained the only main sector to continue recording a negative performance in Q1 2024. However, European office assets did see a significant improvement (mostly due to seasonal and valuation effects), with a total return of -0.88% after the record low of -4.53% in Q4 2023.
European transaction volumes decreased from €46 bn in Q4 2023 to €33 bn in Q1 2024, remaining below the long-term quarterly average of €57.2 bn.
