In 2023, European office building sales reached their lowest point since 2009, post-global financial crisis, despite signs of recovery in the wider commercial property market, according to data released on Thursday. The commercial real estate market has been challenged globally by the impact of the COVID-19 pandemic, driven largely by increased borrowing costs and evolving work patterns that have disproportionately affected offices.
Last year, office property transactions in Europe totaled 42.4 billion euros ($44.1 billion), a 10% decrease from the previous year, marking the lowest volume in 15 years based on MSCI data. The European office market continues to face challenges, with a scarcity of significant deals, and properties such as London's office towers struggling to attract buyers, leaving only select properties in high demand.
In contrast, after two consecutive years of decline, the broader European commercial property sector saw an uptick in deal volumes in 2024 due to heightened sales activity in industrial buildings, apartments, and hotels, as reported by MSCI. Overall, the sector recorded property transactions worth 188.8 billion euros, a 4% increase from the previous year, albeit still the second-lowest total in 12 years.
Tom Leahy, Head of EMEA Real Assets Research at MSCI, highlighted the vulnerability of real estate prices and Europe's growth prospects to market uncertainties, especially amidst the financial market volatility that emerged with the start of Donald Trump's second term as U.S. President. Leahy commented on the real estate market, acknowledging some positive developments but cautioned against the uneven and gradual nature of the recovery.
A recent survey by trade body INREV revealed that real estate investors in Europe prioritize residential, industrial, and student accommodation as their top investment choices for the upcoming year over offices.
(1 euro = 1.04 US dollars)