JP Morgan AM: European real estate may be approaching a turning point
European commercial property has faced challenges recently. Between early 2022 and late 2023, rising interest rates caused prime yields to rise by 150 basis points on average, reducing values by about 20%.
However, the worst now seems to be over. Yields have been stable over the last couple of quarters, and transaction activity has started to improve. With yields in many segments of the market the highest they’ve been in a decade and rental values continuing to grow, today’s valuations likely present an attractive entry point into the sector.
Additionally, with headwinds to growth in the eurozone lingering, we expect the European Central Bank to deliver substantial rate cuts in 2025. Historically, investors who have entered the market at or near the beginning of such cycles have tended to generate above-average long-term returns.
