- Cushman & Wakefield report publishes report analysing economic and property impacts of the first 100 days of Donald Trump’s second presidential term
- Firm’s current base case scenario forecasts a cumulative increase of above 9% in capital values across all European property over the next two years
LONDON, 30 April 2024 – The European commercial real estate sector will weather the impact of tariff uncertainty and continue to expand, according to a new Cushman & Wakefield report analysing the first 100 days of Donald Trump’s second presidential term.
Entering 2025, the regional backdrop for the property sector was stable, with occupier demand steady, early signs of improvement in investment activity, and both the European Central Bank (ECB) and the Bank of England (BoE) leaning toward a more accommodative monetary position.
Despite the hard shift in U.S. economic policy under President Trump, Cushman & Wakefield’s baseline economic view is that the euro area and the UK economy will remain resilient albeit experiencing slower growth in 2025 than previously anticipated.
The report examines the commercial real estate and wider economy implications including capital flows, construction costs, the development pipeline, trade flows, lending activity and pricing, and draws conclusions for occupiers and investors. While the situation remains fluid with developments still unfolding, the report highlights several themes.
Pricing resilience
When central banks began their hiking cycle in 2022, capital values declined for roughly seven consecutive quarters with office assets down by approximately 22%, high street retail by 16% and logistics by 12%. However, following the inflection point in Q4 2023, capital values have registered gains of 5-6% across sectors. Cushman & Wakefield’s current base case scenario – which factors in the prevailing economic outlook, inflation trends, and movements in bond yields – anticipates a more sustained recovery and forecasts a cumulative increase of above 9% in capital values across all property over the next two years.
Fiscal expansion and rate cuts provides upside for Europe
Europe’s pivot from austerity to a more expansionary fiscal policy represents a key shift in economic strategy, with higher public spending – including on defence – set to lift aggregate demand and provide fresh momentum for growth. It also boosts Europe’s long-term competitiveness by modernising key sectors and reducing dependencies.
Sukhdeep Dhillon, Head of EMEA Forecasting at Cushman & Wakefield, said: “With inflation near target and more ECB rate cuts expected, financial conditions will likely ease further. This should lower borrowing costs, boost investment and consumption, and support growth – providing meaningful upside to the euro area’s outlook. A more supportive macroeconomic environment will improve investor sentiment, leading to increased capital flows into European commercial real estate as well as increased demand across sectors.”
Rising construction costs: existing assets set to benefit
Tariffs on key construction materials such as steel and aluminium are expected to place additional strain on project budgets with developers likely to delay, scale back, or cancel less viable projects. The impacts are expected to vary by asset type. Industrial and data centres, for example, have delivered higher returns and stronger rental growth, may be better positioned to absorb cost increases. Operating within tighter margins, the office and retail sectors are more likely to experience development delays, or a strategic pivot toward refurbishing existing assets rather than pursuing new developments.
Dhillon added: “Any reduction in new supply is also likely to put upward pressure on rents in high-demand sectors like logistics and prime offices, with the result that existing commercial real estate assets could emerge as winners.”
Trade flows and defence spending offer manufacturing boost
The impact of tariffs on commercial real estate will depend on sector and country. Logistics and retail may face higher construction and operating costs due to higher prices on imported goods and materials, potentially delaying developments and squeezing margins. However, short-term stockpiling to avoid future tariff costs may drive temporary demand for warehouse space, offering some support for logistics assets.
Rising defence spending could also boost to Europe’s manufacturing sector, supporting job creation and economic resilience, while expansion of defence-related government departments and agencies could spur increased demand for office space. With defence often tied to innovation in tech and engineering, increased spending could push up demand for specialised office or lab space in high-tech corridors.
Dhillon said: “Trade barriers will encourage companies to shift manufacturing closer to home, driving long-term demand for domestic industrial real estate through onshoring and nearshoring strategies. Regardless of tariff impacts, it is essential for manufacturers to diversify supply chains as a prudent risk management strategy.”
Window of opportunity for European investors
Recent weakening of the dollar against the euro could moderate U.S. capital flows into European real estate. On the other hand, shifting global risk sentiment precipitated a flight to safety and liquidity, which has benefitted European sovereign bonds so far. If demand shifts toward less liquid assets that also command perceived safety, European commercial real estate may benefit despite higher asset pricing. Domestic investors may also find a window of opportunity to deploy capital as U.S. investors recalibrate their global allocation strategies.
Dhillon added: “Recent fluctuations in bond yields are likely to impact property pricing and cost of capital. However, this shift could reverse swiftly, depending on the duration of tariffs and ongoing uncertainty. Momentum was building as we entered the year, with capital eager to be deployed. As inflation pressures ease and monetary policy becomes more accommodative, confidence in European debt and capital markets is expected to strengthen in the second half of the year.”
