Dils European Market Report H1 2024

After almost two years of continuous YoY contractions, Q2 2024 closed with a growth of overall investment volume (+39%) compared to the same quarter of 2023, among the monitored countries. Considering the entire first semester, the increase is equal to +19%.

The trend was revealed in the European Market report by Dils, which monitors the market trends on a quarterly basis in Portugal, Spain, France, Italy, Belgium, the Netherlands, Germany, Poland, and the UK, with a specific focus on 15 cities.

A more stable financial environment is helping a gradual recovery of investment activity. In approximately two thirds of the monitored office markets, there was no increase of prime yields over the course of Q2 2024, representing the growing effectiveness of the repricing process. The return of inflation close to 2% pushed the ECB to approve a first rates cut in June, and more are expected in the second half of the year, favoring an easing of financing conditions. Belgium, Poland and Italy are the market showing the highest rate of growth for invested capitals, all above +50% in H1 2024. The second quarter was particularly positive also for the Netherlands (+37% on Q2 2023), Germany (+48%) and the UK (+40%). Despite reducing the negative gap, France emerges as the sole country still undergoing a contraction, especially because of the difficulties of its office market.

Hospitality continued leading the recovery, almost doubling the investment volume of H1 2023. Retail, logistics and living all showed similar recovery rates just below +20%, while office still lagged behind the result of the previous first semester. Still, in Q2 the capitals invested in office almost paired Q2 2023, highlighting the lowest contraction in almost two years.

Out of the 15 monitored cities, 10 saw an increase in office occupier activity. Lisbon, Barcelona and Munich performed particularly well, increasing notably their take-up volume compared to H1 2023. Despite this, vacancy rates are generally still rising, especially when considering older stock in peripheral submarkets.

The logistics occupier market showed differentiated signals among the monitored countries, that overall generate a substantial stability in take-up compared to H1 2023 (-4%). The Netherlands and Poland emerged as the markets showing the best recovery, with take-up increasing by over 20% YoY. On the other hand, Belgium and Portugal are still undergoing a stark reduction of volumes. Limited availability of modern spaces is keeping upward pressure on prime rents. Increasing limits on greenfield developments might lead to a growth in brownfield projects.

In those countries for which data for Q1 2024 are available, the residential sales market is generally still contracting, despite at a slower rate compared to the previous year. This may lead the way to a progressive stabilization in the coming quarters.