Europe Real Estate

With vaccine approval delays and distribution inefficiencies, most European cities remain locked down much like they were in the spring of 2020. Capital Economics estimates the continent will struggle to vaccinate even 40% of the population by the end of the second quarter, suggesting restrictions and economic strain will persist well into the year. Unemployment remains relatively unchanged at an average of 8.3%, but rates vary by country, from over 15% in Spain to below 5% in the Netherlands. Estimates for the first quarter suggest GDP growth will be minimal and still significantly below pre-pandemic levels; as such, second quarter performance will also likely be weak.

The UK has been more successful in approving and administering COVID-19 vaccines, so it may see recovery sooner than countries on the continent. Retail sales increased by 2.1% month-over-month in February, and the composite PMI saw its highest level in seven months in March. Despite this progress, Capital Economics still estimates GDP will have fallen 2.3% quarter-over-quarter in the first quarter. Similar to the continent, official unemployment figures have remained relatively stable so far this year, at around 5%. However, 4.9 million workers remained on furlough support schemes in January, and Capital Economics estimates the real unemployment rate could be over 10%.

Unsurprisingly, many European real estate markets still face minimal investment activity, sluggish leasing activity, and challenging liquidity. Continental Europe real estate values reportedly dropped 3% in 2020, as compared to growing by almost 5% in 2019, but we question the relevance of this number given reduced trading activity. Retail properties were hit hardest last year, while industrial assets appear to be most resilient. Given the likelihood of a prolonged recovery, 2021 investment volumes are not expected to total much more than the €167 billion transacted in 2020. After office take-up dropped 30% year-over-year in 2020, tenants will likely reassess their office space needs as they embrace hybrid working models this year, with the resulting space adjustments unclear at this point in time.

Overall property values in the UK grew slightly month-over-month in February thanks to the 1% growth of industrial values, and industrial investments were up nearly 50% year-over-year in February. Despite this growth, transaction volumes across all properties totaled only £2.6 billion in February, representing a 34% decline year-over-year, mainly due to a notable fall in office activity. Central London office take-up reached a mere 190,000 square feet in February, approximately 80% lower than February 2020 levels. Retail properties continue to face investment and occupier challenges, with annual net store closures reaching a record high in 2020.

For more information on Europe Real Estate, visit

Central London office take-up continues to drop as tenants reassess their space needs.

UK investment volume remained low in the early months of 2021.

Despite the uptick in activity in Q4 2020, 2021 eurozone investment volumes will likely remain low.

Average eurozone unemployment remains relatively stable, although stark differences persist between countries.

UK retail properties suffered after 2020 saw record levels of net store closures.

Angelo Gordon’s Capital Markets Perspectives

AG Capital Markets Perspectives (“CMP”) provides our portfolio managers’ views on the credit, real estate, and private equity markets. To access this quarter’s CMP and past quarterly reports, please complete the form below.

You will now be directed to the Angelo Gordon corporate site.

Proceed Cancel