Investor sentiment is up, and so is activity
Investors are more willing than last year to actually put hands in their pockets and, while comparisons with EXPO 2023 are bound to be flattering, the trajectory is encouraging. This year, sentiment is up and the European real estate market is showing signs of increasing activity, particularly since the return from the summer break. A key boost came on 12 September, when the European Central Bank (ECB) decided to cut interest rates for a second time, which positively impacted market sentiment across the Eurozone. Since then, investor interest has been growing, supported by improving pricing conditions and a progressive increase in the number of assets coming to market.

Living and logistics shine through but offices are back
While logistics and the living sectors continue to dominate most investors’ shopping lists, core office opportunities in key gateway markets are drawing interest from both private investors and insurance companies alike. German and Spanish capital in particular is engaging in processes in the space across the continent whilst US private equity players are pursuing discounted core product in London with increasing conviction. At the same time, higher yielding offices continue to appeal to certain French retail funds (SCPIs), particularly in the smaller lot size bracket. Hospitality, both city and resort, is drawing attention from investors keen to capitalise on operational tailwinds in the sectors. EXPO also confirmed a growing confidence from a broad range of investors towards investment into shopping centres, either as a means of capturing attractive pricing readjustment and/or to diversify exposure to other sectors. 

How low will interest rate cuts go?
The most recent ECB meeting took place on 17 October and encouragingly the bank lowered its deposit rate by another 25 basis points to 3.25%. While the ECB’s economic bulletin from September indicated that inflation is expected to potentially rise again as the year draws to a close, there is growing consensus amongst economists that further cuts are on the cards. As always, the bottom of the market is difficult to determine but it certainly feels like the European real estate market has turned a corner.