ESR Europe's "cautious optimism" for European real estate

Despite a challenging real estate market, asset manager ESR Europe believes its core asset classes (office, logistics, credit, and living) are supported by positive long-term economic trends. 

George Cotterell

Speaking to CRE Media Europe at Expo Real in Munich, George Cotterell, managing director of Commercial Real Estate Debt at ESR Europe, highlighted that the UK and Spain initially offered higher yields, making them less susceptible to valuation drops when interest rates and property yields shifted. 
Germany is on their radar, with potential opportunities expected to emerge within the next 18–24 months. “Although it's a lower-yield market with strong domestic banking, current pressures within the German real estate sector could create investment prospects”, Cotterell explained.
According to him, the residential market in Spain has seen strong demand and rental growth, while the country’s PBSA sector is also less mature than in countries like the UK, offering better student-to-bed ratios and more room for growth.
Cotterell noted a general "cautious optimism" among his peers, adding that the market has either entered a "new reality" or is showing strong indicators of moving forward from past challenges. “While transaction volumes have been low, some deals are occurring at values that provide a sense of current market levels”, he pointed out.
Rising property yields in many sectors have been offset by rental growth, though this varies by sector. There are also clear areas of distress, particularly in suburban offices or those no longer meeting modern standards. Significant risks remain, including complex global politics, ongoing conflicts in Europe, and emerging corporate insolvencies which could impact direct lending markets, Cotterell concluded.
Branislav Pekić