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Market Insights Q3 2023

The correction in European non-listed real estate performance continues once more this quarter as returns hit -0.72% on a fund level and -0.39% on an asset level in Q3 2023. This is the fifth consecutive quarter of negative performance, adding to a continuous decline in transactional activity for European real estate.

Key highlights:

  • The new INREV Consensus Indicator, a forward-looking diffusion index reported a headline reading of 40.8. Four out of the five subindicators, namely economic, new development, investment liquidity and financing, remain well below 50 this December.
  • Negative performance is seen across the main countries, where France and Germany registered the lowest total returns of -1.40% and -1.08%, respectively, while the UK and the Netherlands also reported negative performance in Q3, at -0.29% and -0.12%, respectively.
  • The industrial/logistic sector delivered a second quarter of positive total returns at 0.81%, its best result since Q2 2022, while retail also displayed a positive performance. In negative territory, residential followed closely while the office sector remains the weakest performing sector at a large margin for the second quarter in a row at -2.13%.
  • On the sentiment front, the UK is once more leading in the net positive for the fifth consecutive quarter, while Germany faces continued headwinds due to a weak economic outlook and ongoing valuation delays. Notably, Italy and Spain have experienced a significant shift towards positive sentiment this quarter, aligning with the structural changes observed in Western European markets in recent years.
  • Living segments remain favoured, as the residential sector exhibited the highest level of positive sentiment, followed by student housing, senior living, and hotel/leisure. Simultaneously, the industrial/logistics sector consistently maintained a positive sentiment, completing its fourth consecutive quarter in a net favorable territory.
  • The outlook for European real estate saw a considerable decline in risk and return expectations by the close of 2023. These shifts underscore the challenging market environment and the anticipation of a substantial correction in the near future.

Download the Market Insights December 2023 report and the INREV Sentiment and Valuation Survey Q3 2023 Infographics below.


Market Insights  

Published on 19 Sep 2023