Mr. Phil Tily reports

ALTUS GROUP RELEASES ITS Q3 2024 PAN-EUROPEAN DATASET ANALYSIS ON CRE VALUATION TRENDS

Altus Group Ltd. has released its Q3 2024 Pan-European dataset analysis on European property market 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 euros 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 per cent 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 minus-0.5-per-cent value change across the dataset, compared with minus 0.7 per cent in the prior quarter and compared with minus 1.4 per cent 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 per cent over Q2 2024, with positive appreciation across all subproperty 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 per cent over Q2 2024, benefiting from an above average 0.75-per-cent cash flow effect. Values in the two largest residential markets in the dataset, Netherlands and Germany, were both up, 0.9 and 0.3 per cent, respectively.
• Industrial: The sector finished at the lower end of the hierarchy, but a net positive trade-off between cash flow gains and further yield increases ensured that values continued to rise, up 0.4 per cent over the previous quarter.
• Office: After eight consecutive quarters of declines, values finally turned positive in Q3, up 0.6 per cent 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. Continuing investor interest in this subproperty type was reflected in a positive yield impact which helped values rise by more than average for the quarter.

About Altus Group Ltd.

Altus Group is a leading provider of asset and fund intelligence for commercial real estate. It 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 leaders, its capabilities help commercial real estate investors, developers, proprietors, lenders and advisers manage risks and improve performance returns throughout the asset and fund life cycle.