Ongoing uncertainty across the macroeconomic and geopolitical landscape has raised many questions for the real estate investment industry. In April, the 2023 Capital Raising Survey, published by INREV, ANREV and NCREIF, painted a mixed picture for the industry. It showed that, in 2022, fund managers raised a minimum of €246 billion of new capital for non-listed real estate globally — the second-highest result since the inception of the study. Falling €8 billion short from the record high €254 billion raised in 2021, the results highlighted the year as one of two very different halves.

The bifurcation of the office sector has never been as clear as it is today. And the gap between top-class and average office properties continues to grow. As Nick Waring, development director at PineBridge Benson Elliot in the United Kingdom puts it, the European office market has been “cleaved in two”. Hybrid work patterns, accelerated sustainability goals, higher inflation and interest rates have raised the hurdle for what constitutes a successful property. As a consequence, hard decisions will have to be taken on what to do with large swathes of the office market, which face an increasingly unsure future.

The European real estate sector is being buffeted by an economic storm triggered by the rapid rise in interest rates. Despite the economic doom and gloom, this also presents investors with opportunities, if they know where to look.

In 2009, Geoff Colvin, an award-winning author and business writer for Fortune magazine, published a book titled The Upside of the Downturn. His chapter on risk was particularly enlightening and probably just as applicable to what’s going on today as it was to what was going on then in the wake of the global financial crisis.

Waitrose, the UK supermarket chain, has submitted its first build-to-rent residential planning applications, as it aims to build 10,000 residential units above and around its stores by 2030.

The uncertainty surrounding German commercial real estate pricing is beginning to lift and could restore liquidity in the market. As with many European markets, low transparency surrounding pricing has prevented or thwarted many transactions, in recent months. Savills says, however, that “the fog” around valuations has lifted significantly, with benchmark transactions now appearing in every sector. In recent weeks, Savills has observed the commencement and preparation of a rising number of sale processes.

When HSBC officially confirmed that it would be leaving London’s Canary Wharf by 2027, it rubber-stamped the view that the CBD is losing its appeal among its traditional tenant base. Last year, legal giant Clifford Chance also said it would be leaving the beleaguered office district, where companies have taken up too much space in what has become an isolated location in the new hybrid working world of office employment. Alternative use for the area is rapidly increasing, however, with life sciences emerging as one of the main repurposing avenues favoured by developers at present.