Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting to read:%0A%0A {0} %0A%0A {1}

Commercial real estate in Europe is expected to recover soon, it will probably arrive in Slovakia with a delay

  • The economy will strengthen this year in all European countries, but in Slovakia at the second slowest pace among the V4 countries

  • Rent growth will continue in Europe in all sectors: average in logistics by 3.4%, in offices by 2.1% and in retail spaces by 1.2%

  • Commercial real estate revenue growth should peak in the middle of this year

The European commercial real estate market is starting to recover. Inflation has long since reached the value of 2022 and the end of the cycle of high interest rates of central banks is also approaching, which will start to have a positive effect on all the main indicators of the real estate market. The real estate consulting company Cushman & Wakefield brings the prospects of the commercial real estate market called EMEA Outlook 2024: Trends are coming back.

Jonathan Hallett, Managing Director for Central and Eastern Europe, Cushman & Wakefield:
“Our forecasts suggest that commercial property markets are finally approaching a turning point after a turbulent period. Although economic growth remains modest, trends appear to be returning. Of course, risks such as longer-term inflation remain, but the underlying forecasts in Europe point to moderate economic growth rather than recession. Lower transaction activity in many markets has led to slower pricing, particularly in the office sector, but in more liquid markets such as the UK or the Netherlands we are already beginning to see faster price adjustments. The market should bottom around the third quarter of 2024, when we expect interest rate hikes to end. From the point of view of commercial real estate, the year 2023 was very challenging. However, this year we foresee a recovery in some markets in the EMEA region. The market will stabilize and investors focused on the medium-term horizon will again be able to invest their capital in real estate more confidently, but it is necessary to orientate yourself in the individual sectors and understand the opportunities for tenants as well as for investors."

Offices: Quality before quantity

Despite the fact that the overall demand on the European office market is decreasing, more than half of the leases are currently realized in higher quality premises, i.e. class A or A+. With the transition to hybrid work models, companies emphasize high-quality office facilities, and thus the preference for buildings meeting three basic parameters prevails: suitable location, excellent equipment and sustainability. Buildings with a good ESG rating (sustainability = Environmental, Social, Governance) will already be the standard, not the exception, in the future. Since a large part of offices (up to 76% in Europe) will become obsolete by 2030 due to insufficient fulfillment of ESG criteria, investors have a lot of room for their transformation and appreciation of their capital. A necessary condition for success will also be the flexibility of office spaces, which will have to adapt to the changing needs of tenants.

We see similar trends in Slovakia. Radovan Mihálek, Associate and head of the office real estate team in Slovakia, Cushman & Wakefield: "With the spread of the coronavirus and the subsequent onset of the hybrid work model, a large number of tenants have started to optimize the size of their office spaces. On the other hand, due to the need to attract people back to the offices, and also due to the high competition in the fight for employees and rising energy prices, tenants began to prefer higher quality office space with a smaller area. The market is, and in the next few years will be, in short supply, especially of the highest class A+ office space. In the years 2024 and 2025, only a few (negligible in size) administrative buildings of a higher standard will be built, which will only further deepen the gap between demand and supply in the premium segment of office space in Slovakia. New, top-quality office spaces offer, in addition to the possibility of adapting their layout to the latest requirements, which are mostly different than in the era before the coronavirus, also lower energy consumption, which significantly saves on operating costs. The strengthening ESG trend and legislation enforced at the level of the European Union creates not only additional pressure for the construction of higher quality buildings, but also for the transformation of already existing buildings towards current energy standards. We see a huge space here, and we are already helping several of our clients to bring their existing properties in line with the current expectations and requirements of the market and legislation as part of comprehensive consulting, while the demand for this service is still growing."

Logistics: In Europe, we expect demand to return to pre-pandemic levels this year

The exceptional growth in demand for logistics space in Europe during the pandemic was replaced by a significant slowdown in 2023, when companies began to be more cautious due to economic uncertainty. However, the medium to long-term demand, especially for sustainable storage and production spaces, will support the further strengthening of e-commerce and nearshoring even in 2024. A more significant recovery of investment activity is also expected, which is related to overall confidence in the industrial real estate sector.

Patrik Janšco, Associate and head of the industrial real estate team in Slovakia, Cushman & Wakefield: 

"Within the Central and Eastern European region, the industrial real estate sector recorded very favorable results, including Slovakia, where we are registering demand even higher than the levels reached before the pandemic. From the point of view of the caution of companies operating in the field of industry and logistics, I believe that this year will be similar to 2023. We do not expect a significant revival of activities in the first half of the year, despite the fact that the data may indicate the opposite situation. This may be mainly due to the catching up of client activities from 2023. The year 2024 will be a year of changes not only in the industrial real estate sector, but especially in the ESG sector."

Retail: Stable demand for premium real estate in a challenging environment

Retailers in Europe still face persistent economic challenges and stagnant real sales, which are not expected to recover until the end of 2024. Consumers are facing higher costs for basic needs and so they are still cautious, spending less on the remaining goods, tourism, and especially the oceanic, lags behind the pre-pandemic level.

Veronika Hincová, senior consultant for retail spaces in Slovakia, Cushman & Wakefield:

"In Slovakia, interest in large-scale commercial spaces has increased, which stems from increased interest in our market, especially from the so-called discounters. Increased demand from new and existing players is also positive news for less attractive B-C category projects, as we lack such areas. And that's also because we don't expect any significant new construction in the near future. On the contrary, we see the gradual awakening of projects and concepts that were not realized during the pandemic for various reasons. We also believe that the market has cleaned up after the pandemic and rising energy prices, and those who managed to overcome the crisis will welcome significantly lower inflation than expected. What retailers are not happy about, on the other hand, is the rising minimum wage and significant wage growth due to the low availability of labor. Wage growth combined with lower inflation should offer more favorable conditions for premises owners in the coming year, but secondary projects in Bratislava and other cities with high market saturation remain problematic."

Hotels: Optimism will show in 2024

Through economic and geopolitical challenges, hotels have shown greater resilience than other commercial real estate sectors. Although their transaction activity decreased by 10% year-on-year, the entire market decreased by 54%. Investors continue to target hotels for their flexible income potential, counter-cyclical momentum and long-term structural changes that favor experiences over goods.

David Nath, Head of Hotel Team for Central, Eastern and Southern Europe, Cushman & Wakefield:

"In Central Europe, the hotel market is doing even better: investment activity in the first half of 2023 exceeded the previous year by 52%, and the improving performance of the whole market showed , that optimism lasted until the end, when 2023 surpassed 2022 by 12%."

Residential real estate: Demand is stable in Europe

Demographic factors such as an aging population, declining home ownership rates and urbanization continue to support robust demand for rental housing in Europe, including seniors' homes and student accommodation. The release of inflation in 2024 could reverse the trend of weak construction, which was hampered mainly by rising construction costs. Despite the fact that investments in residential real estate fell in 2023, which was true for the entire real estate market, they still account for about 20-25% of investment volumes in Europe.



Get in touch with one of our professionals.
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Cookies.

Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All