Commercial real estate in Europe, the Middle East and Africa withstood Russia’s invasion of Ukraine in the first quarter of the year, but future impacts are unclear. That is according to the latest Capital Markets snapshot for the region released by Colliers in Budapest this Monday.
The report states that the first quarter of 2022 was dealt a devastating shock by Russia’s invasion of Ukraine – despite this, market resilience and historically high levels of dry powder continued to support investor interest in commercial real estate (CRE) in Europe, the Middle East and Africa (EMEA).
The snapshot nonetheless indicates that in Q1 investor interest in CRE continued to recover from the pandemic, with many investors seeing property as a hedge against rising inflation. Provisional figures for the first quarter suggest a 5% rise in volumes from the same quarter of 2021, with rolling 12-month volumes up by 7%.
Colliers notes that the shock to global supply chains and commodity markets has exacerbated inflation that was already rising rapidly. “Inflation is being felt in the construction industry, among others,” Luke Dawson, Managing Director, EMEA Cross Border Capital Markets, said, adding that “more costly materials have added some unpredictability into the development of new housing and commercial property.”
Both occupier and investor performance has been strong across most European markets in Q1, with renewed confidence in the office sector. “One of the businesses leading the charge was internet giant Google, which closed a GBP 762.5 million deal for London’s Central St Giles development and a EUR 583 million transaction for The Warsaw HUB office complex in Poland’s capital. This points to long-term post-pandemic confidence in the region’s office markets,” Richard Divall, Director, Cross Border Capital Markets explained.
Hotels and leisure, which were hit hard by the pandemic, but have been on a clear revival path since mid-2021, with Southern Europe, in particular, seeing renewed interest. Spanish hotels attracted EUR 1.1 billion of investment in the first quarter of 2022 – more than in the entirety of 2020. “Travel restrictions are easing across the globe, and investors have been anticipating pent up consumer demand for leisure travel to drive a strong recovery in hotel markets during 2022. However, the sharp rise in the cost of living could dampen some of this interest as household budgets come under pressure” Luke Dawson pointed out. “That said, we anticipate higher-end leisure destinations to maintain their appeal, with hotel occupancy rates for the 2022 holiday season closing back in on pre-pandemic levels,” he added.


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