Stay Informed with Updates on European Commercial Real Estate Deal Making 2024
The European commercial real estate market is facing a challenging time as deal making has dropped to a 13-year low at the beginning of 2024. With transaction volumes falling by 26% to €34.5 billion in the first quarter, it marks the seventh consecutive quarter of declines, according to data from MSCI.
The slump in the property market is primarily attributed to the adjustment to higher interest rates, which has led to a decrease in property values and increased financing costs. This has made it difficult for buyers and sellers to come to terms, resulting in fewer office buildings changing hands than ever before.
Despite hopes for a rebound in property investment at the start of 2024, the market continues to struggle as the adjustment to the end of historically low interest rates proves to be a challenging hurdle. The report follows a similar trend in the US, where deal volumes declined by 16% in the first quarter.
While some owners have been forced to sell due to debt pressures, many are holding off in hopes of better prices in the future. High net worth investors, who can purchase without debt, have been driving most of the recent transactions, albeit on a smaller scale.
London remains the top city for investment, even as transaction volumes decrease. The correction in prices in the UK has attracted investors in search of bargains. Despite some high-profile deals falling through during the quarter, sellers remain hopeful for better prices in anticipation of potential interest rate cuts by the Bank of England.
Although the first quarter numbers may seem dismal, industry experts are optimistic about the market dynamics. Private equity groups are beginning to show interest, following in the footsteps of family offices, which could lead to more deals in the coming months.
While hotels were the only sector to see an increase in transactions, the overall market continues to face challenges in terms of pricing and buyer interest. As the market continues to adjust to the new normal, industry players are hopeful for a turnaround in the near future.
