Raising Capital from Corporate Real Estate: Outlook 2024

In 2023 the weakening in corporate disposals appears less severe than the decline in investment volumes in the rest of the commercial real estate market. We estimate that corporates raised €18.4 billion from disposals- a 29% decline against the broader market which fell by 48%. In 2023, corporate sales accounted for 17% of all CRE sales - a 15% increase from the previous peak in 2020.

Though 2023 was challenging for real estate, the good news is that looking through 2024, the macro headwinds appear to be easing with inflation expectations falling across all major European markets. At the same time the market is starting to feel more confident that real estate indicators, both physical and financial appear to be settling.

The argument for corporate owners to restructure and reposition their real estate portfolios in this backdrop remains compelling. For the sellers; shoring up balance sheets where debt is expensive and allowing a clearer focus on core operational skills. For buyers; the attraction of long income, clear and well considered corporate strategies bolstering strong covenants and the near-term advantage of a considerable adjustment downward in valuation assumptions.

We expect to continue to see PE owners sell out of corporate real estate within their portfolios to pay down debt and release cash to remain a dominant feature of the European market. We expect to see this most prominently in the industrial and logistics sector but also in retail as and when the opportunities arise. We anticipate continued capital deployment in sectors like grocery and non-discretionary retail, which are likely to perform well in the face of high interest rates and squeezed consumer demand. The challenge will be pipeline and maintaining the momentum of 2023.