The total value of real estate deals rose 4% in Europe to €189 billion (approx. $313 billion AUD) last year, following a 45% slump in 2023, while US investment increased by 9%.
The Financial Times reported Investment in office properties fell by 10%, marking the sector’s worst year since 2009, as hybrid work models, rising upgrade costs, and future demand uncertainty deterred buyers. Instead, capital flowed into apartments, hotels, and warehouses, driven by strong residential demand and e-commerce expansion.
Chris Brett, head of capital markets for Europe at CBRE, said: “Living is going to dominate [and] that isn’t going to change. There is more intent to invest going into 2025 than there was going into 2024.”
Market recovery and ongoing interest rate concerns
Since the 2021 peak, real estate values across Europe have dropped by 23%, with office values plunging 38%, according to Green Street analysts.
However, the rebound faces challenges as higher-than-expected interest rates could slow growth.
Tom Leahy, head of EMEA real assets research at MSCI, commented: “The mood in the market is on the cautious side of optimistic. Recent volatility in the bond market raised the possibility that rates will stay higher than expected.”
Major Players and High-Profile Deals
US private equity firms Blackstone, TPG, Starwood, KKR, Ares, and Greystar led commercial property acquisitions in 2024. Some of the biggest deals included:
- Blackstone’s sale of a luxury Milan retail block to Kering
- Sales of stakes in the UK’s Liverpool One and Meadowhall shopping centres
- Elliott Management and Oval Real Estate’s acquisition of Langham Estate assets in London
The UK market recorded a 26% increase in real estate investment, with Abu Dhabi’s Modon Holding purchasing half of GIC and British Land’s Broadgate skyscraper, signalling renewed interest in prime office space.
Banks avoiding distressed sales, but risks remain
Despite early warnings of a potential wave of distressed sales, banks have opted to restructure loans rather than force sell-offs. However, a New York Federal Reserve report warned that this “extend and pretend” strategy could delay necessary capital reallocation and expose banks to future risks if markets don’t fully stabilise.
