The 2022–2023 downturn was indiscriminate, based as it was on the rapid move away from 0 percent interest rates, but as always there were winners and losers — with offices clearly sitting in the latter group, writes Rory Allan, managing director and portfolio manager for Barings' value-add real estate fund series.
But European offices are now an overlooked value-added opportunity.
Prime offices have seen yields correcting by almost 40 percent since the peak of the last cycle. The sector has been affected by concerns around its structural fundamentals in the context of the acceleration of hybrid working. A sector which previously accounted for more than 40 percent of European transaction volumes has faced a liquidity crunch, resulting in this halving in 2024, as investors have pivoted to sectors with stronger fundamentals.
However, as always, the situation is nuanced. A couple of years on from the COVID-19 crisis, working practices continue to evolve, but the
