Mr. Phil Tily reports

ALTUS GROUP RELEASES ITS Q1 2024 PAN-EUROPEAN DATASET ANALYSIS ON CRE VALUATION TRENDS

Altus Group Ltd. has released its Q1 2024 pan-European dataset analysis on European property market valuation trends.

Each quarter, Altus Group analyses the performance of an aggregate dataset of core pan-European open-ended diversified funds, representing 29 billion euros in assets under management. The funds cover 17 countries and primarily span the industrial, office, retail and residential property sectors.

Key highlights from Altus Group's Q1 2024 aggregated valuation dataset include:

• In Q1 2024, the writedown of European commercial property values showed a notable moderation, down just 0.5 per cent sequentially over Q4 2023. This represents a significant improvement from the 3.4 per cent drop recorded in Q4 2023 over Q3 2023. Property values within this dataset have now been written down for seven consecutive quarters, during which values have now fallen by a total of 16.5 per cent.
• Against the backdrop of a higher for longer interest rate environment, valuation yields continued to rise putting further downward pressure on the market, but less so than at the back end of last year. Q1 2024 marked the eighth consecutive quarter of rising yields but the minus-1.4 per cent negative impact on values, compared with a more acute minus-4.4 per cent offset in the final three months of 2023.
• Market participants currently expect major European central banks to begin cutting interest rates in the second half of this year. Once interest rates start to fall, yields are expected to stop rising, reducing the downward pressure on valuations they have exerted over the last seven quarters. The increase in yields in Q1 2024 was in part counterbalanced by improving market fundamentals, as reflected in the positive cash flow and cap expenditures metrics.
• The level of value decline eased off notably in each of the four main sectors of the market. Industrial and residential retained nearly all their value from last quarter, and the decline in office valuations notably decelerated.
• Retail consumer spending is expected to increase across the region as inflation subsides and overall economic conditions improve. However, in Q1 2024, retail values did fall the most out of any of the sectors as operating expenses increased and incidences of leases being renegotiated below market rent levels tempered the level of cash flow gains for the sector.
• Residential property valuations were the one sector where yields leveled out in Q1 2024, marking an end to seven consecutive quarterly yield increases.
• Values rose by 3.3 per cent for properties outside of the main four property sectors. Most of the upside can be attributed to student housing accommodation assets where valuation yields began to compress during Q1 2024. The continuing shortage of high-quality student accommodation in European cities, coupled with strong demand for study abroad, is expected to support the attractiveness of this subsector.

"As we start off 2024, we're seeing encouraging signs in the European commercial property market, with commercial property value declines moderating significantly across all sectors," said Phil Tily, senior vice-president at Altus Group. "In terms of all property, the sequential decline of just 0.5 per cent in Q1 2024 was a marked improvement on the 3.4 per cent drop registered in Q4 2023, and was also the smallest decrease posted since property valuations began declining in Q3 2022."

For a detailed review of the sector trends by asset class, please visit the company's website.

About Altus Group Ltd.

Altus Group is a leading provider of asset and fund intelligence for commercial real estate. The company delivers intelligence as a service to its global client base through a connected platform of industry-leading technology, advanced analytics and advisory services. Trusted by the largest CRE (commercial real estate) leaders, the company's capabilities help commercial real estate investors, developers, proprietors, lenders and advisers manage risks and improve performance returns throughout the asset and fund life cycle. Altus Group is a global company headquartered in Toronto with approximately 3,000 employees across North America, EMEA (Europe, the Middle East and Africa) and Asia Pacific.