Despite total volumes reaching only €14.1 billion in the first half of the year across the continent, a number of jurisdictions recorded year-on-year increases, hinting at better times ahead. The UK continued to benefit from the speed of its initial price adjustment, dominating activity with a 29% share of investment volumes, above its five-year average of 24%.

But more upbeat sentiment towards the sector has also fed through into tangible evidence across a handful of other geographies, with office investment turnover recording triple digit year-on-year growth for H1 2024 in both Belgium and Italy as well as markets in CEE (notably in the Czech Republic and Poland) and Scandinavia (including Norway and Denmark), according to MSCI data. While these statistics represent a welcome reversal of trend, volatility of trade remains and one-off, large-ticket deals have the potential to flatter near-term trajectories, especially when compared with the historic lows of 2023.

It is equally true that many of the markets showing continued falls in trade during the first six months of the year are experiencing an encouraging rebound in appetite, with the likes of Stockholm buoyed by robust demand from domestic institutions, and a mix of local private investors and cross-border interest helping to support more positive sentiment in the Netherlands. Our first-hand experience from recent sales processes across Europe corroborates this, with both a greater number of inspections and a growing list of committed underbidders.

The capital that’s currently active in the market varies in nature in relation to the risk profile of assets. Some of the trends include:

• Core office opportunities in key gateway markets are drawing interest from both private investors and insurance companies, with German and Spanish players in particular engaging in processes across the continent.
• US private equity is returning to core-plus and discounted core office assets with a view to harnessing anticipated rental growth. To date, this interest has been concentrated in London but is building in Dublin, with an expectation that it will extend to continental Europe shortly.
• Higher yielding offices continue to appeal to certain French retail funds (SCPIs), particularly in the smaller lot size bracket, whilst similar assets are also driving outbound investment from Israel.
• The investor audience for value-add offices is the most diverse in nature, with interest deriving from multiple geographies and buyer types.

Overall, we believe that the momentum that has begun to materialise throughout H1 2024 will continue. Prime office yields are likely to remain stable in Q3, but we expect to see tentative signs of yield compression during the final quarter and into early 2025 across selected markets.

Further information

Contact Mike Barnes or James burke