Global real estate advisor, CBRE has published its latest look at the European commercial property sector in its recently released EMEA Real Estate Market Outlook 2021.
The multi-national advisor proclaims that “despite the severe impact on economic activity triggered by the Covid-19 pandemic, the European commercial real estate market is well-positioned for a recovery, with investment volumes expected to return to pre-pandemic norms by 2022”.
While CBRE outlines that European commercial real estate investment fell by 25% in 2020, the firm expects that figure to increase by between 5% and 10% next year and return to pre-Covid norms by the second half of 2022.
Unsurprisingly, CBRE has found that the leasing demand for office space has been challenged by the lockdown measures and for the first three quarters of 2020, was down 40% against the same period in 2019. However, CBRE outlines some hope for commercial landlords, with some recovery expected in 2021 with continued demand for high-quality, amenity-rich space in core city locations.
Sadly for many pan-European property investors, CBRE predicts that vacancy rates across Europe are expected to continue to rise, which will reinforce the downward pressure on rents seen since Q1 2020. CBRE also feel that occupiers will execute more agile workplace strategies, including reducing their office footprint, support increased remote working and start to shift towards more choice-based work patterns, including greater use of flex space.
Commenting on the report, Jos Tromp (pictured right), Head of Research, Continental Europe, CBRE said: “Quite clearly 2020 has been a year of enormous disruption for real estate markets, with the Covid-19 pandemic bringing the previous economic cycle to an abrupt end. As with all crises, the impacts and recovery will not be uniform across all sectors and geographies, but new opportunities will emerge, and the likely introduction of vaccines offers grounds for a sustainable recovery as we enter 2021.”
One aspect of business that has been enhanced by the pandemic has been Online retail – according to CBRE, this sector is expected to grow further and will continue to drive demand for Logistics space in 2021.
CBRE state that Prime rental growth for Logistics is forecast to be at a rate of 1.9% per annum for the period 2020-2024 with higher rental growth in urban locations, due to land scarcity and greater demand from e-commerce occupiers.
As expected, however, traditional retailers remain challenged, and in the medium term, and CBRE attest that “the full recovery of major city locations depends on a widespread return to the office and of tourism and business travel” – all of which, relies on the steady uptake and efficacy of a COVID vaccine.
The outlook for the Hotel and the Leisure and Entertainment sectors again remains bleak in the near future, but CBRE expects that the industries will experience what it calls a “material boost in demand” providing the steady public uptake of a vaccine.
Providing all vaccinations work as expected, CBRE believes that hotel demand internationally could return to pre-pandemic norms by 2024, while domestic destinations recover sooner.