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The European commercial real estate investment volume reached a record high in Q3 2022, in large part due to transactions initiated six to twelve months earlier. However, the deteriorating macro-economic and geopolitical environment and the volatility of financial markets suggests a different picture for year end.

Inflation has led central banks to pursue more restrictive monetary policies and property yields have started to rise, the magnitude of the rise is largely dependent on the quality and size of the asset as well as market vacancy.

Rental returns are expected to be the main driver of property performance. Greater selectivity is resulting in the polarisation of markets: strong demand for central locations and higher vacancy in peripheral locations. Alternative real estate assets (such as healthcare), uncorrelated with the economic cycle, continue to offer a relatively competitive risk/return profile and offer portfolio diversification opportunities.

European real estate investment market, record investment volume

The volume of commercial real estate investment in Europe reached a twelve-month high of €283 billion (as at end-September 2022). The Retail sector recorded the largest growth (+23%), followed by logistics (+12%) and offices (+10%). The UK, Germany and France continued to attract the majority of investors with investment volumes of €66bn, €63bn and €34bn respectively over a rolling 12-month period.

While the ma......................

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