2023 European House View

Updated March 2023

Executive Summary

We are pleased to present our 2023 European House View. This publication is produced each year and serves two essential purposes. First, it highlights our outlook for the European economy and the commercial real estate (CRE) sector as well as significant trends and opportunities. Secondly, it reasserts our investment stance before providing a forward-looking framework regarding our investment themes and strategies. The following includes several highlights from the report:: 

  1. Persistently high inflation, and the way in which central banks are responding to it, is dominating the economic outlook. The combination of much higher inflation, the war in Ukraine, and ongoing energy price shock has increased the risk of a recession in 2023. We are in a period where the number of potential black swan events is elevated.
  2. An important factor underpinning the anticipated slowdown in growth is the removal of monetary accommodation as many central banks seek to moderate high inflation. Rising interest rates mean a higher cost of capital is acting as a brake on real estate investment activity while the market is in price discovery mode.
  3. CRE market fundamentals in Europe are solid, with robust leasing activity and strong rent growth. Capital markets are likely to remain under some pressure as central banks continue to raise interest rates to fight inflation. We do expect a value correction to occur that may create compelling investment opportunities beginning in 2023 and into 2024.
  4. A We believe parts of Europe stand to benefit from enhanced deglobalization in the intermediateterm and offers attractive risk-adjusted investment opportunities through the development of high-quality logistics properties as multi-national companies look to nearshore production and supply chains and safeguard inventory.
  5. We see an opportunity to take advantage of unmet consumer and investor demand for institutionally owned multifamily housing in the UK and select European markets through developing multifamily rental homes in locations with compelling market dynamics.
  6. Our conviction around “The Intersection of Real Estate and Technology” has grown even stronger in light of the ongoing market volatility. We believe investments in technology-driven strategies will continue to benefit from the combination of strong demand driven by the digital economy and limited supply.
  7. We believe alternative lenders are well-positioned to take advantage of real estate lending opportunities arising from a pull-back by commercial banks and a permanent change in the competitive structure of the market. More specifically, since the onset of COVID-19, a trend away from relationship banking to an intermediated market has accelerated, and efficiencies, particularly in rehab and construction lending by non-banks, are expected to be enduring.

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