After a turbulent two years, European commercial real estate (CRE) valuations appear to be finding their footing. The third quarter of 2024 brought welcome signs of stability, with offices finally posting positive growth and retail emerging as the standout performer. While challenges remain, particularly around yields and uneven occupier demand, the latest data suggests that investors may be entering a more balanced phase of the cycle.
Altus Group’s Pan-European Valuation Dataset, which tracks €29 billion in assets across 17 countries, recorded increases across all property sectors in Q3 2024. The aggregate all-property category rose 0.6% quarter-on-quarter, marking the second consecutive period of gains and reinforcing evidence that commercial property has stabilised as an investment sector. Offices, long the weakest segment, inched into positive territory for the first time since mid-2022. Retail outpaced all other categories with a robust 1.3% quarterly gain, while industrial and residential sectors registered more modest but steady improvements.
Retail’s resurgence stands out not just for its pace but also for its breadth. The sector benefited from stronger cash flows, diminished yield effects, and healthier occupancy across subsectors. Shopping centres delivered the strongest value growth, followed closely by supermarkets and superstores. Even retail parks and warehouses, though more yield-sensitive, showed clear signs of recovery. This performance reflects a shifting consumer backdrop: falling inflation has boosted household purchasing power, and higher wages are slowly translating into greater confidence. At the same time, the steep rent corrections of recent years have left prime assets more competitively priced, creating opportunities for landlords and investors alike.
For investors wary of muted rental growth in other parts of the CRE market, the resilience of quality retail assets is a reassuring proposition. Prime shopping centres and well-connected retail parks offer higher yields and stronger margins compared with offices and industrial properties. This combination of resilience and flexibility has drawn renewed attention to retail as a sector that, despite structural challenges from e-commerce, still plays a central role in Europe’s urban and suburban landscapes.
Offices, meanwhile, are entering a period of cautious optimism. The Altus dataset shows a 0.5% quarterly uplift in values, though underlying conditions remain uneven. Markets such as France and Sweden recorded consecutive quarters of gains, while Germany and the Netherlands lagged behind amid weaker occupier demand. The UK continues to wrestle with high vacancy levels, particularly in non-prime space, where valuation adjustments may take longer to work through. Nevertheless, with capital spending supporting values and the European Central Bank expected to maintain a looser policy stance, there is hope that the worst may now be over for the office sector.
Industrial and residential assets have held their ground with incremental but steady valuation gains. Strong occupancy and rental growth underpin both categories, though yields continue to exert pressure in some markets. The slowdown in new industrial supply since late 2023 is also helping to rebalance conditions, particularly in markets where demand from logistics and e-commerce operators remains strong. In residential, robust cash flows are providing stability, with the Netherlands and other core markets leading the gains.
In this environment, real estate valuation services are playing a crucial role in helping investors interpret shifting fundamentals and assess where risk-adjusted opportunities lie. From prime shopping centres to logistics hubs, understanding the drivers of cash flow, yields, and capital expenditure has rarely been more important. This information empowers investors to make informed decisions in a dynamic market.
The broader outlook is cautiously optimistic. Retail investment volumes, while still below pre-pandemic highs, are showing signs of bottoming out, and offices appear to have turned a corner after a protracted downturn. As inflation continues to ease and interest rates trend lower, financing conditions should improve further, creating a more supportive backdrop for CRE markets.
Europe’s commercial property sector is not yet in full recovery mode, but the latest figures confirm that stability has returned. With retail leading the way and offices finally stabilising, the foundations are in place for more consistent performance across the continent. For investors and occupiers alike, this marks a welcome shift from the uncertainty that has defined the past two years.
