Market Trends of Europe Commercial Real Estate Industry
This section covers the major market trends shaping the Europe Commercial Real Estate Market according to our research experts:
Increasing Investments in the Commercial Real Estate Sector
The COVID-19 pandemic severely impacted the sector, and the market is currently recovering as increasing investments flow into the sector. The commercial real estate sector had a strong rebound in investments in Q2 2021, with a growth rate of more than 70% compared to the same quarter in 2020. The investment flow continued in Q3 and Q4, with growth rates of 25% and 22%, respectively.
Overall investments in 2021 accounted for more than EUR 270 billion (USD 319 billion), with an increased growth rate of 14% compared to 2020. This represents a strong recovery of the sector after the crisis.
Germany and the United Kingdom experienced the highest investments in the commercial real estate sector. Due to the vaccination roll-outs and pandemic relaxations, Most developers resumed their work with the roll-out of vaccines and pandemic relaxations. There was a rise in investments in the United Kingdom, and the country witnessed a growth rate of 20% in 2021 compared to 2020, followed by Germany, with a 7% growth rate in investments. The French and Dutch markets experienced declining rates in terms of investments.
However, foreign investments in the market were initially impacted by the pandemic but are currently recovering. In 2021, Americans showed strong interest in the sector and brought their investments back to pre-crisis levels, with more than EUR 41 billion (USD 43.56 billion) in investments in the sector.
The Logistics Market is Witnessing Lucrative Growth
The European logistics real estate market is resilient, despite the disruptions caused by the pandemic. E-commerce remains the main driver of the logistics market in Europe. Strong changes in consumer behavior triggered by the pandemic created the demand for online shopping and drove the penetration of e-commerce in the market.
The sector also experienced growth in investments, with more than EUR 25 billion (USD 29.5 billion) in H1 2021. The market set a record growth rate of 62% in 2021 compared to 2020. Meanwhile, the demand in the logistics real estate sector surpasses the supply. The supply in the market is extremely tight due to a severe shortage of development sites and strict regulations. This further resulted in the growth of rental warehouses. For isntance, in H1 2021, the warehouse's average rent increased by 3.2% compared to H1 2020.
Moreover, the United Kingdom and Germany are emerging hotspots for logistics warehouses' space absorption. In H1 2021, Germany experienced record absorption of warehouse spaces, with more than 3.1 million square meters absorbed in 2021.
