Real Estate
European Real Estate: An Uneven Path Ahead
Downward price pressures are easing in the European real estate market. The timing of recoveries in pricing by geographies and sectors likely will occur in line with variations in real estate debt refinancing funding gaps and long-term growth drivers. The Barings Real Estate team discusses how this is shaping investment opportunities.
Economy
- Tentative signs of an imminent pickup in the Eurozone, with the economic recovery likely gaining greater traction in 2025.
- Falling Eurozone inflation and softer economic growth differs to the U.S., where growth remains strong.
- ECB monetary policy could diverge from the Fed, given that it is currently signaling a possible rate cut in June.
Property Markets
- Downward price pressures are easing, with the prime All-Property yield showing signs of stabilizing.
- Property investor conditions are improving, with the property bond spread increasing to 290 bps and credit conditions showing early signs of easing.
- The timing of recoveries in property pricing by geographies and sectors will likely occur in line with variations in real estate debt refinancing funding gaps and long-term growth drivers.
- Office: Particular corporate focus on organizational culture and ESG to drive further progress on the flight to quality.
- Retail: Improving retailer effort rates (calculated as store rents over store turnover) could provide scope for further rental growth.
- Industrial: Fundamentals are returning to their pre-pandemic (and still positive) trend.
- Residential: We anticipate a sustained period where residential rents will outperform prices through top-end and mid-markets.
