overview
Despite heightened global uncertainty, Europe’s real estate recovery story remains intact. Total returns are picking up, driven by rising rents and falling borrowing costs, while low entry values and contained supply help to provide downside protection.
- Uncertainty about U.S. tariffs and global policymaking is weighing on near-term sentiment, but Europe’s real estate recovery story is holding up.
- One key factor is that values fell a long way during the recent correction. As such, a lot of bad news is effectively already factored in, implying a strong degree of resilience.
- Returns picked up at the back end of 2024 as borrowing costs started to come down and any drag from yield expansion faded.
- The outlook is for a further improvement in returns in 2025, supported by elevated income returns and ongoing rental income growth, boosted by a low supply environment.
- In terms of the forecasts, the drivers of returns are shifting in emphasis toward income and income growth, in contrast to yield compression-driven returns that dominated in the last cycle.