Challenging market conditions will persist across the EMEA region into 2024, according to Colliers’ 2024 Global Investor Outlook, but there are expectations of a clearer interest rate outlook and tightening bid-ask spreads.
The firm predicted that the industrial and logistics and multifamily sectors would be the top investment picks in the upcoming year, with the London, Paris, Berlin, Munich, Madrid and Amsterdam markets likely to be of the greatest interest to investors.
It added that the UK had experienced the quickest pricing correction, resulting in the strongest uptick in investment activity in 2023, followed by Germany.
A record proportion (25%) of investors surveyed said they have ESG-based disposal and acquisition strategies in place – up from 10% just two years ago and Colliers anticipates a “wave” of disposals and value-add opportunities to come to market, with investors raising capital for brown-to-green conversions of these assets.
Luke Dawson, head of global and EMEA capital markets at Colliers, said: “We’ve heard from investors that stability is key. With anticipated ‘higher for longer’ interest rates to combat inflation, expectations for capital markets are tempered. If greater certainty emerges, along with the softening of underlying valuations, that will drive additional transaction volume next year. The best-positioned investors will be those who are ready to act on opportunity.
“The path to market recovery will be uneven with divergence across multiple sectors around the world. Similar patterns are evident in hotel and retail, where budget segments are thriving as inflation-hit consumers look to control costs and luxury segments are being lifted by a wealthier customer base. It is the undistinguished middle market that is struggling to find traction with investors, unless heavily discounted. In a rapidly evolving environment, understanding markets and asset classes at a more granular level is critical to investors’ value-generating strategies.”
Damian Harrington, head of research, global and EMEA capital markets at Colliers, added: “Many investors feel I&L assets provide greater stability and growth potential, given its strong underlying fundamentals and structural drivers. Facing fewer lenders and higher borrowing costs, we’re seeing investors pool funds and form alliances and joint ventures with partners who have the expertise to navigate specialist or sub-sector markets.
“Availability of well-located, premium (net-zero/ESG) space will remain lean, while the value gap between the best and the rest continues to widen. This should contribute to spillover demand in retrofitted stock as investors generate value from brown-to-green conversions. The redevelopment and repurposing of assets to meet sustainability criteria or serve a new purpose is set to be a significant driver of activity next year and beyond.”
