PWC | ULI Emerging Trends in Real Estate - Europe 2024

The 2024 PWC | ULI Emerging Trends in Real Estate - Europe captures a mixed mood among industry leaders.

Europe’s real estate leaders are slowly coming to terms with a market burdened by inflationary pressures and high interest rates while addressing the ever-growing commitments around environmental, social and governance (ESG) issues. Meanwhile, central bank interest rate increases in 2022 and 2023 have left large sections of the industry forsaking dynamic strategies for a more passive monitoring of policies that affect the price of debt, valuations, construction costs and distress risk.

A wedge continues to be driven between market prices and valuations. One acknowledged consequence has been record-low investment volumes. But the relative risk-adjusted return outlook in a higher-for-longer interest rate environment is also raising questions about real estate’s status as a favoured asset class. Though the survey indicates greater business confidence and profits for 2024 than a year ago, this is from a low base and is still well below the optimism of previous years. The industry is paying close attention to economic forecasts for Europe that suggest sluggish growth at best.

Though the survey indicates greater business confidence and profits for 2024 than a year ago, this is from a low base and is still well below the optimism of previous years. Much of the positivity among interviewees is based on the strength of underlying occupier demand. So far, the changing macro background to real estate has taken a heavy toll on investor sentiment, but it is yet to be felt fully in occupier markets. Therefore the industry is paying close attention to economic forecasts that suggest sluggish growth at best across Europe but with real worries for the big economies, such as Germany and the UK. Many interviewees regard recession as a “realistic concern”.

Sentiment is inevitably clouded by the geopolitical backdrop to business and investment, not least the devastating crisis in Israel and Gaza, although the war in Ukraine is still very much front of mind. This year, the risk around national political shifts to the right — as a result of recent or upcoming elections — has also become a talking point.

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