Falling Interest Rates will be the Catalyst for Recovery in the European Real Estate Market, Says CBRE

Falling interest rates will spur a revival in the real estate capital markets, according to CBRE’s 2024 European Market Outlook. However, tepid transaction activity and subdued economic growth are likely to make 2024 another challenging year for real estate before a more convincing recovery in 2025. As inflation continues to cool in 2024, CBRE expects interest rate cuts by the ECB in H1 2024, followed by the Bank of England in H2.

For real estate, prime capital values in Europe are expected to bottom out in 2024 as interest rates stabilise. However, the cost of debt is likely to remain high and, consequently, CBRE anticipates only a modest uptick in investment activity. 

Occupiers are demonstrating a willingness to pay premium rents for environmentally compliant buildings. However, this is dependent on the availability of adequate real estate, so now is an opportune time for investors to benefit from repositioning buildings early in this transition period

Ludovic Chambe, Head of ESG & Sustainability Services, Continental Europe at CBRE.

According to the report, there is €66bn of capital targeting European real estate, 63% of which is expected to be deployed in value-add and opportunistic strategies. Muted demand for core strategies illustrates the challenges of the current market, with a lack of price discovery in the prime segment making it difficult for buyers and sellers to gauge where values currently are. Decarbonising the built environment will play an increasingly key role in strategies that aim to mitigate climate-change effects in 2024 and beyond. With carbon-intensive assets at risk of value depreciation, CBRE anticipates more incentives for financing retrofit and refurbishment projects.

Tasos Vezyridis, Head of Thought Leadership, Europe at CBRE

As capital values solidify and the economic backdrop continues to improve, buyers and sellers will start to become more comfortable with new pricing levels. We are anticipating higher investment volumes in 2024 compared with 2023, with activity predominately picking up in the second half of the year.

Tasos Vezyridis, Head of Thought Leadership, Europe at CBRE

Overview of key sectors:


The main influences on the office market in 2024 will be a further evolution of hybrid working strategies and a deepening polarisation between best-in-class assets and secondary stock. Modest leasing growth is expected in Europe, with volumes set to increase by up to 10% in 2024 compared to 2023, but they will remain below historic norms. Quality differentials will become even more apparent, with poor quality space likely to suffer higher voids and faster obsolescence, however refurbishment opportunities exist for those with the appetite to do so. Development activity remains low across Europe and, with speculative space representing just over half of the development pipeline, occupier choice for new built space will remain constrained.


The logistics sector has seen lower levels of take-up in 2023 due to economic uncertainty and a reduction in the rapid expansion of online retail following the pandemic. Developers are reacting to weaker demand by reducing construction activity. Consequently, vacancy rates are expected to increase in H1 2024, before starting to stabilise during the second half of the year. Prime rents are forecast to continue to increase, although at a more moderate rate, and a bifurcation of the market is anticipated with an expanding gap in rents between prime units and older buildings. 


An improvement in demand drivers for the retail sector, including sales and footfall, is expected to have a positive impact on prime rents, which CBRE forecasts to grow at around 3% in 2024. As with office and logistics assets, the polarisation between prime and secondary assets is expected to continue, with strong location fundamentals driving rental growth and occupier demand. Retailers are expected to continue investing in physical stores, with a greater focus on prime locations, and e-commerce will also continue to grow, albeit at a more moderate rate than during the pandemic.  


A deepening supply and demand imbalance will be the main challenge for the living sector in 2024. The already constrained development pipeline is expected to shrink further due to a lack of development funding, high construction costs, lengthy planning procedures and uncertainty around exit values whilst demographic trends are continuing to drive demand, particularly in the larger European cities. According to the report, the number of households in Europe is expected to increase by 3% over the next five years. Increased household formation should boost demand for rental properties as home ownership affordability remains a challenge. Strong occupier fundamentals are also visible in student housing and senior living.  


Domestic and short-haul leisure travel will continue to be the primary driver of European hotel demand in 2024, with international leisure expected to meaningfully recover as long-haul flights from Asia-Pacific return. Hotel demand growth is expected to outpace supply, as higher construction and borrowing costs constrain the development pipeline. This difference is expected to be most acute in popular tourist locations where demand will remain robust.

Data Centres

CBRE expects strong demand from hyperscalers to push data centre take-up to new highs in 2024, with vacancy rates likely to fall to record lows across Europe’s largest markets. The combination of lower available capacity, coupled with higher build and operational costs, means that it is very likely that providers will increase rental rates at colocation centres in 2024. Furthermore, artificial intelligence (AI) requirements are likely to increase demand for data centre capacity. 


CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at