A third quarter of negative performance for European real estate, but sentiment improves

The correction in European non-listed real estate performance continues this quarter as returns hit -0.97% on a fund level and -1.38% on an asset level in Q1 2023. This is the third consecutive quarter of negative performance for European real estate, albeit the pace of repricing slowed down significantly, with seasonal and valuation effects playing a role according to the latest Market Insights paper.  

Key highlights: 

• UK real estate prices appear to stabilise with a negative capital growth of -1.11%, leading to a total return of -0.02% on an asset level. It is too early to call the bottom of the cycle for the UK, especially given the flat economic outlook. Continental Europe continued to correct, with all major markets reporting negative Q1 2023 asset-level performance, driven by further capital growth declines. 
• Across the largest markets, retail posted positive returns while industrial/ logistics showed early signs of recovery. Offices saw the weakest performance in most markets, including in the UK where the sector stayed firmly in the negative with -1.74%, reflecting what is likely to be the most bifurcated market segment. 
• European transaction volume decrease further this quarter totalling €35.2 billion, the lowest since Q2 2012. This is a fifth consecutive quarter of a significant declines in pan-European transaction activity. 
•  According to the INREV June 2023 Sentiment Survey, investment sentiment continues to stabilise, while the view on European real estate performance has not changed since March 2023, although it still remains quite negative.  

Download the Market Insights June 2023 report and the INREV Sentiment and Valuation Survey Q1 2023 Infographics below.

View the press release