Principal foresees bullish real estate market for Expo Real 2025

Principal Asset Management is optimistic about the European real estate market leading up to Expo Real 2025.

Rachel Shone

Rachel Shone, managing director, EMEA Real Estate, Principal Asset Management, commented: "Sentiment from the two previous Expo Reals was downbeat, but the case for European real estate is growing stronger. With inflation easing, interest rates stabilizing and a renewed confidence in capital markets, this year’s Expo Real promises a much more optimistic mood. We expect an increase in activity with capital in motion again, US policy uncertainty and shifting global alliances all spurring an increased commitment to European real estate allocations.
Principal sees Expo Real as a key event for networking and collaboration, with a focus on resilient sectors like living and data centres, where demand significantly outstrips supply.
Data centre specialist Seb Dooley, senior fund manager at Principal, highlights that while AI service providers are a new growth area, the primary demand drivers remain hyperscale cloud and connectivity infrastructure. 
He pointed out: “Investor enthusiasm around generative AI has driven a surge in valuations across the sector, where asset values may no longer reflect underlying fundamentals. Investors focused on the AI segment exclusively risk missing the broader upside of AI’s expansion, such as the wider increase in data generation and demand, while taking on inflated valuations and unpredictable returns. Across Europe. supply/demand imbalances are forcing vacancy rates to record lows in the already saturated FLAP-D markets, as well as secondary hubs like Berlin or Madrid. With land and power increasingly constrained, existing facilities will become ever more valuable.”
Europe's data centre market is experiencing record-low vacancy rates in major hubs and secondary markets due to supply/demand imbalances, making existing facilities increasingly valuable. This market dynamic influenced Principal Asset Management's recent acquisition of the Connecta Park data center in Düsseldorf, its second in Germany. The Düsseldorf site is strategically located at a convergence of major fiber routes, making it a crucial connectivity hub. This acquisition positions Principal to benefit from the overall growth in data generation and the specific demand boost from generative AI inference, while mitigating risks associated with highly specialized AI-specific sites.