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Real Estate

European Real Estate: An Uneven Path Ahead

May 2024 – 9 min read

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.

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Paul Stewart

Head of U.S. & European Real Estate Research & Strategy

Joanne Warren

Director, Real Estate Research

Benjamin Thatcher

Associate Director

The document is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This document is not, and must not be treated as, investment advice, investment recommendations, or investment research.

In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved and before making any investment decision, it is recommended that prospective investors seek independent investment, legal, tax, accounting or other professional advice as appropriate.

Unless otherwise mentioned, the views contained in this document are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Parts of this document may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this document is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any forecasts in this document are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Any investment results, portfolio compositions and/or examples set forth in this document are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this document. No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments.

Investment involves risks. Past performance is not a guide to future performance. Investors should not only base on this document alone to make investment decision.

This document is issued by Baring Asset Management (Asia) Limited. It has not been reviewed by the Securities and Futures Commission of Hong Kong.

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