INREV: Recovery underway in European non-listed real estate

The European non-listed real estate investment market is recovering, according to the latest INREV Consensus Indicator, that shows a headline reading of 55.8, the third consecutive quarterly improvement.

“European real estate is showing signs of a long-awaited recovery, reflected in both sentiment and the latest performance data,” said Iryna Pylypchuk, director of research and market information, INREV. “We are seeing a certain level of rebalancing and the first signs that core capital is returning, both on the equity and the debt side.”

The investment liquidity sub-indicator registered the most significant uptick for the second consecutive quarter, rising sharply from a year ago, while leasing and operations is the only sub-indicator to decline, dropping from first to fourth position.

According to the Q2 2024 INREV Fund Index, total returns reached 0.97%, up from 0.02% at the end of Q1 2024. At 0.17%, capital growth turned positive for the first time since Q2 2022.

Positive performance is also underlined by an uptick in transactions volumes, which reached €30.1 billion for Continental Europe in Q2 2024 – up from €24.2 billion in the previous quarter.

UK transaction volumes also rose, from €13.1 million in Q1 to €14.6 billion in Q2 2024. While transaction volumes remain below historic averages for both geographies, improving liquidity suggests growing investor confidence.

Assets in the Netherlands and the UK marked yet another quarter of outperformance, showing positive returns across all main sectors: industrial and logistics, office, residential, and retail. France reported solid results for the industrial & logistics and the residential sectors, while offices posted a negative performance.

Germany, meanwhile, continued its streak of negative performance for the eighth consecutive quarter. The German retail sector reported the steepest quarter-on-quarter decline, while office sector returns remained in negative territory for the 8th quarter in a row, with further value falls anticipated.

At an overall sector level, the Q2 2024 INREV Asset Level Index shows that residential remains the top-performing sector, followed by industrial and logistics. Retail assets also posted positive returns, but office assets continued a lacklustre performance.

Selected by 31% of respondents, Spain is top of the list of the most preferred investment destinations for the first time since the survey began in December 2020. Interest in Spain is predominantly driven by improved economic conditions and higher yields.

After four consecutive quarters in the top spot, the UK is now the second-most preferred location for investment, with 25%. Elsewhere in Southern Europe, sentiment is also positive for Italy, which climbed to 13% (up from 3% in June) and for Portugal with 3%.

The overall picture is improving, Pylypchuk said, but “risks remain, especially given we are moving into an alpha market where asset selection, operational efficiency, and asset management will play a pivotal role to performance.”