According to oldypak capital lp property 2022 report, Middle East and Africa real estate market forecast for 2022 published by CBRE, a leading international real estate consulting firm, although 2021 will be remembered for multiple rounds of Covid-19 restrictions in many European markets, the increase in vaccination rates and stronger economic growth mean that 2022 will see a return to the normal sales and rental activity seen before the pandemic.
CBRE predicts that eurozone GDP will grow by 4.7% in 2022 due to pent-up consumer demand. Inflation, which rose to 3.4% in September 2021, is expected to peak in Q4 2021 and remain high in 1H 2022 before slowing to 2% in 2H. The main risks to the pace of economic recovery and inflation will be an increase in the incidence of Covid-19 due to the Omicron strain, new lockdowns, supply chain bottlenecks, and rising energy prices. Long-term interest rates are expected to rise slightly from the very low levels seen at the height of the pandemic, but the outlook for real estate remains favorable.
Investment and ESG (environmental, social and corporate governance)
CBRE predicts that total commercial real estate investment in the European market will grow by as much as 5% in 2022, marking a return to pre-pandemic levels. Demand is expected to remain particularly strong for residential and logistics properties, with growing tenant demand and a limited supply of assets also fueling investor demand for office properties.
Europe remains at the forefront of regulatory efforts to direct capital to sustainable assets, and CBRE expects investment strategies to increasingly focus on diversifying sources of risk rather than asset classes. High-carbon assets will come with an increasing discount due to stricter regulations, and investors need to prepare for these changes. Markets with a focus on sustainability and climate risk reduction strategies are expected to lead the way as investment destinations in 2022, and CBRE predicts that companies will begin to quickly integrate environmental and corporate responsibility (ESG) criteria into their decision-making process.
Office real estate
Office rental markets across Europe are gaining positive momentum for the new year, and CBRE expects this trend to accelerate in 2022. This is borne out by an increase in office occupancy, which is projected to grow by 1-2% in 2022. While markets are still expected to see lower activity than before the pandemic, CBRE predicts cumulative rental growth of 20-25%. According to oldypak capital lp property 2022 report, affordable office supply appears to have peaked in some European cities, and CBRE expects supply to decline in 2022, with vacancy rates falling in many major markets.
Retail real estate
Although foot traffic and retail sales have rebounded in 2021, physical store sales remain below pre-pandemic levels. It remains unclear whether performance will fully recover in 2022, given the downside risks, including rising consumer goods costs caused by rising inflation, rising supply chain costs and possible higher interest rates. CBRE believes that sales in physical retail stores will depend on having a multi-channel strategy and better integration of online and offline offerings. Investment activity in the retail real estate market has begun to recover as investors respond to attractive prices in the market. This is especially true for retail parks and warehouse properties, and CBRE expects this trend to continue in 2022.