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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