The number of property deals and the volumes transacted plunged in Q4 2022 in comparison to the final quarter of 2021 in major EMEA markets due to higher interest rates and financing costs amid surging inflation. However, property investment will resume its growth path this year, as the inflation and interest rates become more stable, says Colliers.
”Stability will provide investors with the reassurance they are seeking and will likely narrow the bid-ask spreads we’re seeing in the market, allowing deals to proceed more swiftly,” said Luke Dawson, Head of Global and EMEA Capital Markets at Colliers.
The agency’s consultants suggested that an upsurge in activity may not translate into an equivalent increase in investment volumes, however, as investors place downward pressure on asking prices and demand higher yields in major markets.
“We expect yields to move outwards further in the first half of 2023 as prices adjust to the new normal, and investors scrutinize deals to ensure they’re weather-proof against the macro environment,” added Damian Harrington, Head of Research, Global Capital Markets and EMEA at Colliers.
In Germany, full-year volumes for 2022 were in line with the country’s 10-year average even amid the sizeable impact the war in Ukraine has had on energy supplies and inflation rates. However, Colliers does not anticipate this performance to be repeated in 2023, with price discounts of 20-30% and a reduced deal count bringing down volumes significantly.
On the French market, the agency expects a rebound of investments right from the first quarter of this year. Office investment in the Greater Paris Area is likely to lead the way. Logistics will also continue to see pronounced levels of interest from investors, even though in the current macroeconomic conditions they are scrutinizing deals in closer detail.
The UK has registered a slowdown among all property asset classes, but the market will return to positive investment sentiment starting with the second semester of this year amid weakening inflation and stability returning to the interest-rate environment.
On the Italian market, the industrial and logistics sector continues to benefit from the e-commerce boom, while the pipeline of residential development looks well-placed to capitalize on the current economic crisis subsiding later in the year.
“Equity-heavy players are enjoying a market without much in the way of competition at the moment, and they are seeking opportunities accordingly,” concluded Dawson.
