European Commercial Property Price Index: July, 2024

Picking Up Speed

The Green Street Commercial Property Price Index, which measures pricing of a broad swathe of Pan-European commercial properties, is up +0.5% in the second quarter (+0.9% YTD). Across sectors, hotel took gold, with a 2.0% increase in pricing in the quarter off the back of several notable transaction comps. The residential (+1.2%), industrial (+1.4%) and data centre (+0.7%) sectors follow closely, as buyers’ confidence builds momentum. The surge in investment liquidity in the retail sector suggests prices held steady in June. Heading in the opposite direction, B/B+ quality office bid pricing continues to slip (-1.0% in Q2), hampered by negative sentiment from buyers as well as lenders.

“A pickup in European transaction activity over the past three months suggests that buyers and sellers are finding common ground, with bid pricing nudging a tad higher across some sectors”, said Marie Dormeuil, Senior Analyst at Green Street. “Since the beginning of ’24, when we first noted that European commercial real estate was cheap versus fixed income, the former has outperformed the latter by c. 500 bps. By contrast, real estate looks no better than fair value versus REITs. The public market’s view is clear, and in line with our own fundamental work, namely industrial, hotel and data centre private market returns are expected to perform slightly better than retail and residential, while strongly outperforming the laggard office sector.”