Dils European Market report Q1 2024

In the first quarter of 2024, the contraction of real estate investments has finally come to a halt across Europe. This results from the European Market report by Dils, which tracks the market quarterly across Portugal, Spain, France, Italy, Belgium, the Netherlands, Germany, Poland, and the UK, with a specific focus on 15 cities. The overall investment volume was in line with the first quarter of 2023, ending a series of year-on-year contractions that began in the second half of 2022.

However, despite the current stabilization, the market will need more time to go through a real acceleration. A more favorable outlook in interest rates dynamics would be a key driver for a gradual increase in investment activity, making the meeting of offer and demand easier. Currently, some potential sellers may postpone bringing their assets to the market in the wait for the first round of interest rates cuts, to avoid losses in the current situation of lower prices.

The country showing the higher recovery is Italy, doubling the result of Q1 2023. Another cluster of countries taking the road to an upswing comprises the UK and Portugal, whose results of Q1 were significantly higher than the previous year. While Belgium, the Netherlands and Germany show stability, further contraction can be observed on the markets of France, Spain, and Poland.

Hospitality emerged in Q1 2024, outperforming other asset classes and doubling its investment volume on a YoY basis. In reverse, Office and Living are still on a downward path, touching the minimum quarterly result in a long time. Lastly, Logistics and Retail seem to show some signs of stabilization.

Controversial signals have appeared on the office occupier market, as trends have been diverging across the various markets. Overall, Southern Europe shows more activity compared to the Northern countries, with Lisbon registering the best YoY variation in terms of take-up level. Vacancy rates are growing in most of the monitored cities because of the difficult placement of older stock in peripheral districts, as demand focuses on new/renewed buildings and central submarkets.

The Logistics market saw another quarter of contraction in occupier activity, common to all countries. This is the result of a combination of factors, such as the slowdown of the manufacturing sector, the limited offer of spaces and the subsequent recent rising in rents, contrasting with the cost awareness of logistics players.