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Commercial real estate in Europe - statistics & facts

The coronavirus pandemic has been an unprecedented period in recent history. After the global economy was brought to a halt for several months in 2020, the commercial real estate sector in Europe has been on a path of recovery. Across most European countries, the size of the commercial property market grew in 2021, outperforming both 2019 and 2020. Commercial real estate, which includes property types used for business purposes, such as industrial and logistics, offices, and retail, attracted a record-high level of investments in 2021. The United Kingdom (UK), Germany, and Sweden were among the major European markets where investment volumes spiked. Out of all different asset classes, investors were most interested in industrial and logistics real estate, which has shown incredible resilience since the start of the pandemic. When it comes to the most attractive markets, London, Berlin, and Paris ranked best.

Different sectors have been disproportionately affected by the pandemic

Office real estate has traditionally been investors’ top choice but the series of national and regional lockdowns during the pandemic and the growing share of companies transitioning to a hybrid working model have led to a drop in demand. Despite the reduced leasing activity, however, the biggest office real estate markets in Europe continue witnessing low vacancy rates. Another trend accelerated by the coronavirus pandemic is the rise of e-commerce across European consumers. Not only does more online shopping challenge traditional brick-and-mortar retailers, but it raises the already high demand for near-urban warehousing. In some of the most competitive markets, such as Germany’s biggest cities and London, prime logistics rental yields were below 3.5 percent in the second quarter of 2021. Furthermore, nearly all European countries saw industrial and logistics real estate investment increase in 2021.

Biggest challenges ahead

Among the issues that industry experts were most concerned about in 2022 were the availability of suitable assets or land for acquisition and development, availability of (re)finance opportunities, sustainability, and construction costs. With construction on the rise, construction material prices have surged in the past two years: In the UK, the effect has been most dramatic for fabricated structural steel and concrete reinforcing bars (steel). Sustainability is another topic with a growing momentum: Green leasing, tracking carbon reduction targets, and climate technology solutions investment were some of the main actions targeted by commercial real estate experts.

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