European real estate values have gone through a significant correction, and, having stabilised in 2024, are set for a rebound in the coming years. Some parts of the market are set to rebound faster than others. After a relatively subdued investment and building cycle, there are supply shortages, even in parts of the market with resilient demand. In addition, there is a need for capital to modernise existing stock and meet the growing ESG requirements of institutional investors.
The low liquidity market environment of today offers an attractive entry point as investors can selectively acquire assets below valuation and capture immediate upside. We believe the value-add opportunity set is expanding to investment sectors not traditionally seen, including operationally-intensive sectors that offer higher potential returns, but require more specialist expertise to execute on.
We highlight five key themes that set out why European value-add real estate is an attractive investment opportunity now:
- Value Rebound: Rising values, falling borrowing rates set to boost returns
- Attractive Entry Point: Illiquidity and stressed capital structures
- Need for Capital: Capex shortfalls and rising ESG requirements
- Supply Shortages: Constrained supply for most property types and locations
- Expanding Opportunity Set: Operating platforms drive income growth potential.
Read on to explore these themes in PGIM Real Estate’s latest research paper.
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The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.
Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.
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