Just an illusion or an inflection? The salvo of quarterly market studies gives a slightly more precise reading of the state of play, to repeat the Raymond Devos sketch.
On the European front, analysts are talking bluntly of the entry into a new real estate cycle. How do we measure this? By an upturn in transactions, with investment volumes rising for the 3rd consecutive quarter in Europe. By a landing in valuations, restoring the risk premium for real estate. Since the rise in interest rates, repricing has spared no asset class. It has even been violent for some of them, notably secondary offices. But it is coming to an end for most segments, and is reversing (albeit marginally) for some.
France is an exception. Commercial real estate commitment volumes were still at half-mast in Q3, down 11% since the start of the year, to some €10 billion. The dissolution of the French National Assembly has taken the wind out of investors' sails. The incomprehensible slippage in the budget deficit has damaged our image in the eyes of the financial markets, with French ten-year yields overtaking those of the Portuguese and Spanish and now approaching those of the Italians. It's not certain that the Lépine contest of new taxes and other compulsory levies will be enough to reverse the curve.
Notwithstanding these Franco-French parliamentary skirmishes, the real yardstick for investors remains the trend in key rates. The downward trend is clearly underway, a sign that the battle against inflation is considered to have been won by the central banks. It's clear to everyone that we won't be returning to pre-2022 levels, and certainly not to pre-2008 levels. Projections point to an ECB rate floor of 2.25% by the end of Q1 2025.
Against this backdrop, European real estate is set to come out of the doldrums. In its five-year projections, Praemia Reim anticipates overall annual returns of between 5% and 7% for most asset classes, with the notable exception of offices, whose total return is reduced to between 4% and 5.5%, mainly due to a zero return on capital. This is still a sound investment.
The other judge will be the economic situation. Here, too, we are entering a new cycle, less buoyant for Western countries. As one property owner rightly said: "My risk is the health of my tenants.