Altus Group Limited، the Canadian provider of asset and fund intelligence for commercial real estate، announced that Europe's commercial property slump is easing up as values fell just 0.5 % in the three months to March to achieve the best first-quarter performance since the 2nd quater in 2022 and a significantly slower rate of decline than the 3.4 % drop recorded in the final quarter of last year.

Altus Group Limited whose headquartered in Toronto، Canada،  with operations in North America، Europe and Asia Pacific، stated that Europe's commercial property slump is easing up، after almost two years of falling valuations and valuations have still declined for seven straight quarters.

Europe's commercial property values fell just 0.5% last quarter

Altus Group، that is driven by data-powered ARGUS technology، analytics and deep industry expertis، assured that Europe's commercial property values fell just 0.5% last quarter and the figure represents the seventh straight quarter of shrinking values، the modest decrease represents the best performance since June 2022.

Altus Group explained that Europe's commercial property values have been hit by higher interest rates as buyers demand better returns in the face of higher yields on low-risk government debt. 

Some of that impact has been offset by rising rents but uncertainty about the timing of interest-rate cuts has drawn out the slump، which began in the aftermath of Russia’s invasion of Ukraine in early 2022، data compiled by Altus Group show.

Level of Europe's commercial property values decline eased off

Phil Tily، Altus Group head of performance analytics، wrote in a report on Wednesday، May 15، that the level of Europe's commercial property values decline eased off notably in all sectors of the market which can be divided into two camps، with industrial and residential value declines easing off the most while retail and office values continued to fall more than average. 

Warehouses recorded the best cash flow performance during the quarter، with a 1.4 % increase، helping mostly offset the impact of higher yields and leaving values just 0.2 % lower، while، anaemic cash flow growth for office and retail properties by contrast meant values fell by 0.8 % and 1.1 %،  respectively، according to Altus Group.

Altus Group ’s calculations are based on a pool of 29 billion euros of property

Altus Group ’s calculations are based on a pool of more than 29 billion euros (S$42.4 billion) of property in core pan-European open-ended property funds while in Canada the sellers re-entering the housing market but the buyers continue to be constrained.
Altus Group revealed that Canada’s major housing markets are starting to recover، but one economist says a more pronounced recovery cannot be sustained until interest rates move significantly lower. 

Altus Group indicated that as sellers have begun re-entering Canada’s major housing markets since last spring، affordability conditions are still weighing on buyers and  figures from local real estate boards in April highlight sharp increases in new listings and inventory across Vancouver، Toronto and Montreal. 

When demand and prices dipped، there will be better outcomes this spring

This could reflect a confluence of sellers that include many who took a pass at the fall market  when demand and prices dipped in the hope of better outcomes this spring as some of the sellers could be in distress in the face of high interest rates،  Altus Group report said. 

Altus Group report pointed to lower home resale figures in March and April in most major markets as buyers are not moving to capitalize on increases in supply، while high rates and poor affordability clearly continue to weigh heavily on buyers and it is expected that such pressure to persist until several rate cuts have been implemented. 

Vigorous، sustained recovery won’t take shape until interest rates fall

Despite sellers entering the market home prices picked up slightly across Canada’s major markets، but a vigorous، sustained recovery won’t take shape until interest rates fall meaningfully perhaps in the second half of 2024. 

It is expected that the Bank of Canada to start lowering rates in June، followed by 100 basis points of cuts over the second half of the year and another 100 basis points of cuts into 2025. 

Prospective buyers were facing last April peak unaffordable market conditions amid high interest rates and home prices and the Canadians were facing the toughest time ever to afford a home.