Finding the opportunities in European real estate

The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested.

What opportunities does Europe offer real estate investors?
As the recovery in Europe has gathered pace, growth is now much more widely spread across the Continent, with supportive macro tailwinds on the horizon. The US and European Union have both agreed to work towards a new economic relationship, with zero tariffs implemented across a number of sectors. We expect interest rates won’t be raised until the latter part of this year.

Against a supportive macro backdrop, our expectation is for all-property rental growth to see 2.2% p.a. over the next three years1, which should boost property values in the medium term. Demand for the highest quality assets has been strong, supporting capital values and rental growth. Our expectation is that income, rather than capital growth from further yield compression, is likely to be a key driver of future European returns.

This places the onus upon asset managers to maximise a property’s income profile and highlights the attraction of strategies that place income at the forefront of the strategy. For European long lease real estate, 70% of the value of a typical asset comprises the present value of the contracted income.

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