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CRE investors look to JVs and sale and leaseback opportunities amid ongoing EMEA market pricing reset

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CRE investors look to JVs and sale and leaseback opportunities amid ongoing EMEA market pricing reset

Major portfolio deals remain scarce as investors focus on assets in mid-price range
Pricing uncertainty and tighter financial conditions continue to dampen trade in EMEA commercial real estate (CRE), although green shoots can be seen with investors fine tuning their asset exposure through strategic joint ventures and sale and leaseback opportunities, according to Colliers' latest EMEA Capital Markets – Market Snapshot (Q2 2023).

Market pricing confidence has yet to return to the European region in earnest, according to Colliers, amid persistent inflation in many countries prompting further central bank interest rate rises. Luke Dawson, Head of Global and EMEA Capital Markets, Colliers explained: “Deal-making continues to suffer as buyers and sellers differ over asset valuations, as reflected in continued bid-ask spreads.

“Many investors remain reluctant to place major portfolios and assets on the market when limited buyer appetite and financing constraints make their desired prices challenging to achieve. At the moment, the sweet spot for transactions seems to be between €20-€60 million.”

Industrial & logistics still sector of choice
Industrial and logistics (I&L) was the standout sector in an otherwise weak quarter for EMEA. Colliers noted that I&L pricing has adjusted more quickly to the turbulent macroeconomic picture, with rental growth encouraging more transactions. Yet owners are still hesitant to place core logistics assets on the market amid adverse conditions.

Benchmark deals were completed
Similar considerations continue to impact demand, supply and dynamism in the office sector across markets and asset sizes. Nevertheless, some benchmark deals were completed, such as international hotel and hospitality giant Accor’s sale of its global headquarters in Paris to the Valesco Group for €460 million. The transaction, advised by Colliers, included a 12-year sale-and-leaseback agreement that allowed Accor to simplify its balance sheet structure without operational disruption.[1]

JVs rise in popularity
Investors are exploring various structures to optimize their exposure to markets. “Many of the investors we are speaking to are looking for a development partner, certainly in the industrial and logistics space,” continued Luke Dawson, Head of Global and EMEA Capital Markets, Colliers. “Equally, joint-venture structures have become more prevalent as investors look for a growth platform without having to set up their own asset management team.”

Value-add in vogue
Another notable trend is investors seeking value-add properties they can convert and upgrade to core. “Investors are now looking for some form of downside protection on offices, meaning that they want to be able to add value to the properties themselves through sustainability upgrades that meet new workplace and energy/emissions demands,” noted Damian Harrington, Head of Research, Global and EMEA Capital Markets.

Peaking of interest rates and price adjustments
With Europe moving further into the summer vacation season, Colliers does not anticipate any upswing in overall activity until Q4 2023 at the earliest, when interest rates are expected to have peaked.

“The Fed and ECB recently increased central bank policy rates by a further 25 basis points (bps) in July to stay on top of inflation, and we expect the UK Bank of England decision to follow suit. This would bring the all-sector yield gap for Europe down to, or almost, zero as of end Q2 2023,” continued Damian Harrington, Head of Research, Global and EMEA Capital Markets.

“The positive side of the story is that the US and UK are closing in on peak rates, and the ECB not too far off, so investors can start looking forward to rates dropping back in the year ahead. When that will be is up for debate, and we could see further pricing adjustments short-term. The cost of rolling over debt should bring more assets to market, particularly in Germany and the Nordics where value corrections and exposure to debt are high.”

Weakness likely to be year-long in Germany
With volumes at around €5 billion, the second quarter in Germany was as weak as the first. Volumes for the first half of 2023 were less than half of the 10-year average, and Colliers does not expect any significant improvement in the second half of 2023 due to high financing costs and the impact these have on the burden of rolling over expiring debt.

Hotels dominate Spanish market in Q2
The post-pandemic tourism upswing is aiding the hospitality sector in some markets. In Spain, hotels accounted for 36% of total investment volume over the quarter, led by deals for holiday hotels in primary markets. This was a bright spot in an otherwise slow quarter, with market decision-making impacted not only by a shifting interest rate environment but also uncertainties related to Spain’s general election.

Sweden listed property sector sees sharp decline
Since peaking in November 2021 Sweden’s listed property sector has fallen by more than 50% and was trading at a near-50% discount to net asset value by the end of Q2. Listed companies are therefore clearly now on the sell-side, but there are buyers too, including a new market entrant in the shape of pension fund AP7. While transaction activity may see a gradual recovery in Q3, there remains a gap between buyer and seller pricing expectations.

UK activity subdued by inflation uncertainty
In the UK, higher-than-expected inflation in Q2 led to further debate over where interest rates could peak, causing a drag on deal-making. At around £6 billion (€7 billion), volumes were down by over 60% on the same quarter of last year. Buyer attention has shifted noticeably towards value-add opportunities – of the £2 billion under offer in the London office market, for example, more than half is classed as value-add. The market for core assets, by contrast, remains sluggish due to wide bid/ask spreads.

About Colliers Nordics

Colliers is a leading global real estate advisory firm with an enterprising culture. Our pan Nordic team consists of more than 250 professionals in Sweden, Norway, Denmark and Finland within the advisory business, whereas +80 Capital Markets experts. Colliers is the market leader in the region, with over 27% of market activity based on a full-year 2021 RCA data. Colliers experts offer qualified knowledge within Capital Markets, Debt Advisory, Project Finance, Leasing, Occupier Services, Valuation, and Research. With offices in all Nordic countries and a strong Nordic cooperation, we create effective solutions to create value for all our clients, both locally and cross borders.

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About Colliers Group

Colliers is a leading diversified professional services and investment management company. With operations in 66 countries, our 18,000 enterprising professionals work collaboratively to provide expert real estate and investment advice to clients. For more than 28 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of approximately 20% for shareholders. With annual revenues of $4.5 billion and $99 billion of assets under management, Colliers maximizes the potential of property and real assets to accelerate the success of our clients, our investors and our people. Learn more at, Twitter @Colliers or LinkedIn.


Lovisa Edström

Lovisa Edström

Press contact Head of Marketing & Communications Sweden +46 70 323 27 96
Karoline Fagerheim

Karoline Fagerheim

Press contact Head of Marketing & Communications Nordics +47 928 405 54

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