The real estate agency forecasts aggregate European commercial real estate investment to fall by 25% in 2020, increase by between 5% and 10% in 2021 and return to pre-Covid norms by 2022.
Appetite for assets remains strong, particularly for logistics, and prime office assets in major markets, and this is expected to continue in 2021.
Despite the severe impact on economic activity triggered by the Covid-19 pandemic, CBRE has said that European commercial real estate market is “well-positioned for a recovery”.
It predicts that euro area GDP will contract by 7.3% in 2020, before recovering by 4.6% in 2021, assuming the lockdowns ease and a broad-scale vaccination becomes available.
Short term interest rates are not expected to rise until 2023 and CBRE expects monetary policy to remain very accommodative for at least the next 18 months, positively impacting the real estate market.
Leasing demand for office space has been challenged by the lockdown measures and for the first three quarters of 2020, was down 40% against the same period in 2019. However, CBRE expects some recovery in 2021 with continued demand for high-quality, amenity-rich space in core city locations. Vacancy rates across Europe are expected to continue to rise, which will reinforce the downward pressure on rents seen since Q1 2020.
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