Altus Group releases its Q3 2024 Pan-European Dataset Analysis on CRE valuation trends

Each quarter, Altus Group centralizes and standardizes CRE valuation data for the European market, pulling insights into the factors driving commercial property valuations. The Q3 2024 aggregate dataset included Pan-European open-ended diversified funds, representing €29 billion in assets under management. The funds cover 17 countries and primarily span the industrial, office, retail and residential property sectors.

"The third quarter marked the first time in two years that the movement in property values across the Pan-European valuation dataset turned positive," said Phil Tily, Senior Vice President at Altus Group. “We are seeing green shoots emerge across all main property sectors which, combined with last week’s second European Central Bank rate cut this year, points to greater stability ahead.”

Despite a continued uptick in valuation yields, CRE values across the Pan-European valuation dataset were up 0.63% across all commercial property types, a noteworthy improvement after two years of declines. Valuation yields continued to increase across all property types for a tenth consecutive quarter, putting moderate downward pressure on values. In Q3, low single-digit yield increases accounted for -0.5% value change across the data set, compared to -0.7% in the prior quarter and compared to -1.4% in the opening three months of the year. The key drivers of the appreciation in values were improvements in cash flows and a reduction in projected capital modelled into valuations.

Key highlights by sector include:

• Retail: emerged as the strongest performing sector in Q3 with values up 1.3% over Q2 2024, with positive appreciation across all sub property types. Supermarkets, which service the most essential side of the retail sector, stood out with both a positive yield impact and strengthening cashflow over the period.

• Residential: values increased by 0.53% over Q2 2024, benefiting from an above average 0.75% cashflow effect. Values in the two largest residential markets in the dataset, Netherlands and Germany, were both up, 0.9 and 0.3%, respectively.

• Industrial: the sector finished at the lower end of the hierarchy, but a net positive trade-off between cashflow gains and further yield increases ensured that values continued to rise, up 0.4% over the previous quarter.

• Office: after eight consecutive quarters of declines, values finally turned positive in Q3, up 0.6% over the previous quarter. However, when factoring in the amount of capital expenditure during the quarter, the return on appreciation was still technically negative within the sector.

• Other: outside of the main sectors, hotel assets had another comparatively strong quarter. Ongoing investor interest in this sub property type was reflected in a positive yield impact which helped values rise by more than average for the quarter.

For detailed review of the sector trends by asset class, please click here.