Trump 2.0: The First 100 Days | EMEA
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TRUMP 2.0 THE FIRST 100 DAYS
IMPLICATIONS FOR THE ECONOMY & PROPERTY EMEA
Cushman & Wakefield As of April 28
CONTENTS
CONTENTS
WHAT DOES IT MEAN FOR OCCUPIERS & INVESTORS?
KEY POLICY PRIORITIES
EXECUTIVE SUMMARY ECONOMY & CRE
WHAT TO WATCH
Cushman & Wakefield
2
EXECUTIVE SUMMARY
CONTENTS
Executive Summary
The Economy
Property
• In the first 100 days, we have observed a hard shift in U.S. economy policy under President Trump . From a European perspective, trade policy and the trajectory of U.S. growth are front of mind. • Our baseline is that U.S. tariffs and related uncertainty will slow euro area growth but the economy will weather the impact and continue to expand . The UK’s economy will also remain resilient but could face stronger inflationary pressure due to its more open economy and greater reliance on trade. • Rising defence spending signals a shift from austerity to fiscal stimulus, supporting growth and boosting Europe’s long-term competitiveness by modernising key sectors and reducing dependencies. • The situation remains fluid with many developments still unfolding, and there may be both potential benefits and drawbacks to these policy changes that will unfold over time.
• The EMEA property sector entered 2025 with a stable backdrop , supported by steady occupier demand and early signs of improvement in investment activity. • Tariffs on materials like steel and aluminium will increase construction costs, and curb supply pipelines, at least until greater clarity emerges. Existing assets will likely benefit . • Trade barriers will encourage companies to shift manufacturing closer to home, driving long term demand for domestic industrial real estate through onshoring and nearshoring strategies . • The ECB and the BoE entered 2025 leaning toward a more accommodative monetary position . Expectations are for this to continue, though a decision will of course be data dependent. • In the short term, credit and risk spreads across Europe may experience some widening due to economic uncertainty and market volatility. However, underlying fundamentals remain supportive of a gradual recovery . As inflation pressures ease and monetary policy becomes more accommodative, confidence in European debt and capital markets is expected to strengthen in H2 2025 .
CONTENTS
Cushman & Wakefield
ECONOMY & CRE
CONTENTS
Uncertainty at Highest Levels Since Pandemic Economic Policy Uncertainty Index
900
800
700
600
500
400
300
Index, 1980=100
200
100
0
Jul-1986
Jul-1997
Jul-2008
Jul-2019
Jan-1981
Jan-1992
Jan-2003 World*
Jan-2014
Jan-2025
Mar-1990
Mar-2001
Mar-2012
Mar-2023
Nov-1982
Nov-1993
Nov-2004
Nov-2015
Sep-1984
Sep-1995
Sep-2006
Sep-2017
May-1988
May-1999 Europe
May-2010
May-2021
Source: The Federal Reserve Economic Data (FRED), World GDP Weighted Average
CONTENTS
Cushman & Wakefield
Early Market Optimism Begins to Fade Equities, Index Jan 2025=100
Equities Performance through Jan 2025
Equities Performance through April* 2025
130
100 105 110 115
120
110
70 75 80 85 90 95
100
90
80
70
S&P 500
FTSE 100
DAX CAC 40
S&P 500
FTSE 100
DAX CAC 40
Source: Euronext, Deutsche Boerse, FTSE Russell, S&P Global - *as of 25/04/2025
CONTENTS
Cushman & Wakefield
European Bonds Gaining from Flight to Safety? 10YR Bond Yields (%)
Impact on CRE
• Financial markets initially reacted positively to Europe’s fiscal shift, with 10YR bond yields diverging from the U.S.—signalling growing investor confidence and expectations of stronger near-term performance in Europe. • The recent rotation out of the USD may offer some support to the EUR and other European currencies, as investors gradually adjust their portfolios in response to evolving interest rate differentials and shifts in global risk sentiment. • European sovereign bonds and corporate bonds are a good proxy for CRE lending rates. If U.S. volatility drives investors into
Bond Yields through Feb 2025
Bond Yields through Apr 2025
5
5
4.5
4.5
4
4
3.5
3.5
3
3
European bonds, we could see CRE lending rates drift lower, providing a window for investors to grab relatively attractive debt.
2.5
2.5
2
2
1.5
1.5
01/01/2025
06/01/2025
11/01/2025
16/01/2025
21/01/2025
26/01/2025
31/01/2025
05/02/2025
10/02/2025
15/02/2025
20/02/2025
25/02/2025
02/03/2025
07/03/2025
12/03/2025
17/03/2025
22/03/2025
27/03/2025
01/04/2025
06/04/2025
01/01/2024
21/01/2024
10/02/2024
01/03/2024
21/03/2024
10/04/2024
30/04/2024
20/05/2024
09/06/2024
29/06/2024
19/07/2024
08/08/2024
28/08/2024
17/09/2024
07/10/2024
27/10/2024
16/11/2024
06/12/2024
26/12/2024
15/01/2025
04/02/2025
24/02/2025
US UK Germany
US UK Germany
Source: Deutsche Bundesbank, IMF, Bank of England, U.S. Board of Governors of the Federal Reserve System (FRB), Moody's Analytics
CONTENTS
Cushman & Wakefield
Shifting Capital Flows, Return of European Investors?
Impact on CRE
• The recent weakening of the U.S. dollar against the euro may influence the relative attractiveness of euro-denominated assets for U.S.-based investors, as European assets have become relatively more expensive. All else being equal, this currency shift could have a moderating effect on U.S. capital flows into European real estate. • On the other hand, shifting global risk sentiment precipitated a flight to safety and liquidity, which has benefitted European sovereign bonds so far. • If demand shifts away toward less liquid assets that also command perceived safety, European CRE may benefit. Investors may seek diversification and lower-risk opportunities, thereby supporting continued capital inflows into European real estate despite higher asset pricing. • Domestic investors may also find a window of opportunity to deploy capital as U.S. investors recalibrate their global allocation strategies.
1.10
1.05
1.00
0.95
0.90
0.85
0.80
0.75
Jul-2016
Jul-2017
Jul-2018
Jul-2019
Apr-2020 EUR-USD Jul-2020
Jul-2021
Jul-2022
Jul-2023
Jul-2024
Oct-2016
Oct-2017
Oct-2018
Oct-2019
Oct-2020
Oct-2021
Oct-2022
Oct-2023
Oct-2024
Apr-2016
Apr-2017
Apr-2018
Apr-2019
Apr-2021
Apr-2022
Apr-2023
Apr-2024
Apr-2025
Jan-2016
Jan-2017
Jan-2018
Jan-2019
Jan-2020
Jan-2021
Jan-2022
Jan-2023
Jan-2024
Jan-2025
Source: ECB, Moody's Analytics
CONTENTS
Cushman & Wakefield
Tariff Rates Set to Rise Estimate Based on Tariff Policy as of April 14, 2025
30
25
20
15
10
5
0
1959Q2
1961Q2
1963Q2
1965Q2
1967Q2
1969Q2
1971Q2
1973Q2
1975Q2
1977Q2
1979Q2
1981Q2
1983Q2
1985Q2
1987Q2
1989Q2
1991Q2
1993Q2
1995Q2
1997Q2
1999Q2
2001Q2
2003Q2
2005Q2
2007Q2
2009Q2
2011Q2
2013Q2
2015Q2
2017Q2
2019Q2
2021Q2
2023Q2
2025Q2
U.S. Effective Tariff Rate (%)
Source: Moody’s Analytics
CONTENTS
Cushman & Wakefield
Tariff Uncertainty Weighs on Businesses EIB Investment Survey (2024)
Impact on CRE
• Recent shifts in tariff policies are increasingly being cited as a significant challenge for firms across Europe, prompting businesses to re-assess their global supply chains and sourcing strategies. • Survey data points to a short-term rise in warehousing demand due to higher change—particularly benefiting European markets as nearshoring gains traction. Supported by stable EU trade rules and possible government incentives, this shift could drive long-term demand. • The impact on CRE is unclear. The uncertainty is likely to affect appetite for contracting new space in the near term. Overhauling supply chains is costly. However, the longer tariffs remain in place, the greater the likelihood that businesses will implement supply chain diversification strategies—potentially driving new growth opportunities across Europe. inventory levels, but this is likely temporary as businesses remain committed to lean supply chains. In contrast, supplier diversification offers more lasting
Recent Changes in Customs & Tariffs
Changes to Sourcing Strategies
10 15 20 25 30 35 40
60
50
40
30
20
% share of firms
% share of firms
10
0 5
0
EU
EU
Italy
Ireland Italy
Spain
Portugal Spain
Ireland
France
Austria
France
Netherlands Poland
Sweden
Finland
Belgium
Sweden
Germany
Hungary
Denmark
Germany
Netherlands
Diversifying/increasing no. of countries import from Reducing % of goods/services imported Investing in digital inventory and inputs tracking Increasing stocks and inventory
Czech Republic Major obstacle Minor obstacle
Source: EIB investment Survey 2024, European Investment Bank (The survey covers approximately 12 000 firms across the EU27)
CONTENTS
Cushman & Wakefield
Stagflation Signs Starting to Appear
The LEI* declines further
Manufacturing Sector Contracting
Confidence Falling
100 110 120 130
-18 -16 -14 -12 -10
30 40 50 60 70
<50 Contraction
80 90
Index, 2016=100
80 90 The Stag The Flation 100 110 120 130 140
Jul-2024
Jul-21
Jul-22
Jul-23
Jul-24
Apr-2024
Oct-2024
Jan-2024
Jun-2024
Jan-2025
Mar-2024
Mar-2025
Feb-2024
Feb-2025
Nov-2024
Dec-2024
Aug-2024
Sep-2024
Oct-21
Oct-22
Oct-23
Oct-24
Apr-21
Apr-22
Apr-23
Apr-24
Jan-21
Jan-22
Jan-23
Jan-24
Jan-25
May-2024
Jul-19
Oct-24
Oct-17
Apr-21
Jun-22
Jan-23
Jan-16
Mar-24
Mar-17
Feb-20
Dec-18
Nov-21
Sep-20
Aug-23
Aug-16
May-18
Euro area Manf PMI
UK Manf PMI
Euro Area Consumer Confidence
Euro area leading economic index
Import Prices Trending Up
Although Inflation Expectations Steady
Businesses Planning to Raise Prices
1 2 3 4 5 6 7
10 12
0 2 4 6 8
Jul-2022
Jul-2023
Jul-2024
Jul-2021
Oct-2022
Oct-2023
Oct-2024
Oct-2021
Apr-2022
Apr-2023
Apr-2024
Jan-2022
Jan-2023
Jan-2024
Jan-2025
Jul-2024
Jun-2023 Aug-2023 Euro Area Selling Price Expectations, Balance, SA Oct-2023 Dec-2023 Feb-2024 Apr-2024 Jun-2024 Aug-2024 Oct-2024 Dec-2024 Feb-2025
Euro Area Import Prices 2021=100, Index
Oct-2024 Euro Area 3YR ahead Nov-2024 Dec-2024
Feb-2024 Euro Area 1YR ahead Mar-2024 Apr-2024 May-2024
Jan-2024
Jun-2024
Jan-2025
Feb-2025
Aug-2024
Sep-2024
UK 1YR ahead
UK 3YR ahead
Source: Various *The Leading Economic Index (LEI) signals potential turning points in the euro area economy. It comprises eight indicators, including ECB yield spreads, consumer expectations, stock prices, manufacturing and services surveys, order book volumes, residential permits, and a systemic stress index.
CONTENTS
Cushman & Wakefield
Tariffs Fuel Stagflation Scenario in 2025
Impact on CRE
• While the euro area is expected to avoid a recession, growth has been downgraded. Although the direct impact of U.S. tariffs on euro area growth is modest, the combined indirect effects—such as tighter financial conditions and heightened uncertainty— could significantly amplify the impact, with a 1% tariff hike potentially reducing GDP by 14bps. • The combination of tariffs—which could lead to rising prices—and monetary policy challenges, significantly increases the risk of stagflation in the UK, with Europe to follow. • That said, Europe enters 2025 with inflation pretty well under control, and central banks may decide to focus on growth concerns which may lead to further cuts. • A short-term stagflation scenario may weigh on property in 2025, but if growth weakens more than inflation, central banks could respond with more easing— potentially setting the stage for a rebound in 2026.
Stag…
…flation
1.6
4.0
1.4
3.5
1.2
3.0
1.0
0.8
2.5
0.6 % YOY
% YOY
2.0
0.4
1.5
0.2
0.0
1.0
2024Q1
2024Q2
2024Q3
2024Q4
2025Q1
2025Q2
2025Q3
2025Q4
2024Q1
2024Q2
2024Q3
2024Q4
2025Q1
2025Q2
2025Q3
2025Q4
Euro area HICP UK CPI
Euro area Real GDP UK Real GDP
Source: Cushman & Wakefield Research, Moody’s Analytics
CONTENTS
Cushman & Wakefield
But Rebound Expected in 2026
Economic Rebound Expected in 2026
Inflation to Converge Toward Target
2.5
4.0
3.5
2.0
3.0
1.5
2.5
1.0 % YOY
% YOY
2.0
Inflation target
0.5
1.5
1.0
0.0
2024Q1
2024Q2
2024Q3
2024Q4
2025Q1
2025Q2
2025Q3
2025Q4
2026Q1
2026Q2
2026Q3
2026Q4
2027Q1
2027Q2
2024Q1
2024Q2
2024Q3
2024Q4
2025Q1
2025Q2
2025Q3
2025Q4
2026Q1
2026Q2
2026Q3
2026Q4
2027Q1
2027Q2
Euro area Real GDP UK Real GDP
Euro area HICP UK CPI
Source: Cushman & Wakefield Research, Moody’s Analytics
CONTENTS
Cushman & Wakefield
Germany’s Change of Course Business Expectations and Budget Balance
Impact on CRE
• Germany is easing fiscal policy after a period of strict borrowing limits. The fiscal spending package includes: exemption of defence spending exceeding 1% of GDP from the debt brake limit; a €500bn infrastructure fund; states’ ability to run fiscal deficits of up to 0.35% of GDP; and access to 20% of the infrastructure fund. • This fiscal package is expected to boost Germany’s economy, though the full benefits will take time to materialise. Germany's shift toward easing fiscal policy, alongside a substantial infrastructure investment, will benefit CRE by boosting construction. There will be a greater demand for logistics and industrial space as infrastructure upgrades and manufacturing revitalisation take hold. • Additionally, the fiscal flexibility granted to states could further stimulate regional development. • Overall, fiscal stimulus creates a more
German Ifo* Business Expectation
Germany General Budget Balance
60
100
4
40
50
2
20
0
0
0
-2
-50
-20
%
Index, balance
-4
EUR bn
-40
-100
-6
-60
-150
-8
-10
-200
Jul-2006
Jul-2009
Jul-2012
Jul-2015
Jul-2018
Jul-2021
Jul-2024
Jan-2005
Jan-2008
Jan-2011
Jan-2014
Jan-2017
Jan-2020
Jan-2023
Business Expectations Business Climate Business Situation
supportive environment for CRE investment and development.
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
2024
Balance, Total EUR % of GDP (RHS)
Source: Ifo Institute, German Federal Statistical Office Statistisches Bundesamt. *A monthly survey measuring German business sentiment, assessing current conditions and expectations for the next six months.
CONTENTS
Cushman & Wakefield
Fiscal Expansion & Rate Cuts to Provide Upside for Europe Government Balance to GDP Ratio Euro Area & German GDP Growth
Impact on CRE
• The euro area’s shift away from austerity toward more expansionary fiscal policy represents a key shift in economic strategy. Higher public spending is set to lift aggregate demand and provide fresh momentum for growth. • With inflation near target and more ECB rate cuts expected, financial conditions will likely ease further. This should lower borrowing costs, boost investment and consumption, and support growth— providing meaningful upside to the euro area’s outlook. • A more supportive macroeconomic environment will improve investor sentiment, leading to increased capital flows into European CRE as well as increased demand across sectors.
2.0
0
-2
1.5
-4
1.0
-6
-8
% Y/Y
0.5
% GDP
-10
0.0
-12
-14
-0.5
2019Q2
2019Q4
2020Q2
2020Q4
2021Q2
2021Q4
2022Q2
2022Q4
2023Q2
2023Q4
2024Q2
2024Q4
2025Q2
2025Q4
2026Q2
2026Q4
2024Q1
2024Q2
2024Q3 Germany
2024Q4
2025Q1
2025Q2
2025Q3 Euro area 2025Q4
2026Q1
2026Q2
2026Q3
2026Q4
Euro area govt balance
Source: Federal Statistical Office (FSO), Eurostat, Moody's Analytics
CONTENTS
Cushman & Wakefield
Construction Firms Faced with Higher Costs Construction Costs
Impact on CRE
• Tariffs on key construction materials such as steel and aluminium are expected to place additional strain on project budgets across the CRE sector. • However, the impact will vary by asset type as not all sectors are equally exposed to rising construction costs. • Sectors like industrial and data centres, which, in recent years, have delivered higher returns and stronger rental growth, may be better positioned to absorb these cost increases. Their higher margin profiles provide more flexibility to manage elevated input prices. • In contrast, sectors such as office and retail often operate within tighter financial margins, making them more vulnerable to fluctuations in construction costs. As a result, these sectors are more likely to experience delays in development or a strategic pivot toward refurbishing existing assets rather than pursuing new ground up developments.
Producer Prices in Industry
Producer Price & Cost Indices
80
130
120
60
110
40
100
20
90
% Y/Y
0
80
Index, 2021=100
-20
70
-40
60
Jul-2011
Oct-2015
Apr-2007
Apr-2024
Jan-2003
Jun-2004
Jan-2020
Jun-2021
Mar-2017
Feb-2010
Nov-2005
Dec-2012
Nov-2022
Sep-2008
Aug-2018
2005 Q1
2006 Q2
2007 Q3
2008 Q4
2010 Q1
2011 Q2
2012 Q3
2013 Q4
2015 Q1
2016 Q2
2017 Q3
2018 Q4
2020 Q1
2021 Q2
2022 Q3
2023 Q4
May-2014
Industry (except construction) Manufacture of basic iron & steel Aluminium production
Costs
Producer prices
Source: The World Bank, Eurostat
CONTENTS
Cushman & Wakefield
Rising Costs Could Slow Supply Pipeline New Deliveries and Vacancy Rate
Impact on CRE
• Rising construction costs are likely to slow the development pipeline, as higher costs lead developers to delay, scale back, or cancel less viable projects. • This could reduce new supply and put upward pressure on rents in high-demand sectors like logistics and prime office. • Developers will likely require higher levels of preleasing to secure financing and reduce risk, which may further slow the rollout of new projects. • Lower economic growth will likely lead to higher vacancy rates in the near term. However, as the development pipeline slows and new supply becomes more limited, vacancy rates are expected to gradually improve beyond the medium term. • Bottom line: Existing CRE assets could emerge as winners.
6
12%
5
10%
4
8%
3
6%
2
Millions sq.m
4%
1
2%
0
-1
0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
New Supply (m sq.m)
Net Absorption (m sq.m)
Vacancy Rate (rhs)
Source: Cushman & Wakefield Research, as of Q3 2024
CONTENTS
Cushman & Wakefield
Early Signs of Caution Amid Resilient Start Investment by Quarter, (€bn)
Impact on CRE
• European investment volumes have begun to reflect early indications of market uncertainty, with figures for March showing an 11% decline compared to the same month last year. This dip suggests a cautious sentiment may be emerging among investors. • However, it's worth noting, even with the slowdown in March, investment activity remained relatively resilient in Q1, with volumes tracking 8% above the same period last year, indicating a solid start despite recent softening. • Recent fluctuations in bond yields are likely to impact property pricing and cost of capital. However, this shift could reverse swiftly, depending on the duration of tariffs and ongoing uncertainty. Momentum was building as we entered the year, with capital eager to be deployed.
400
350
300
250
200
€ billion
150
100
50
-
Jan Feb Mar
Apr
May Jun Jul
Aug Sep Oct
Nov Dec
2025
2020
2017
2024
Source: MSCI Real Capital Analytics
CONTENTS
Cushman & Wakefield
Pricing Remains Resilient Prime Capital Value Index
Impact on CRE
• When central banks began their hiking cycle (2022), office assets saw the steepest decline, with values falling by approximately 22%, followed by high street retail at 16% and logistics at 12%. These declines were sustained over a period of roughly seven consecutive quarters. • However, following the inflection point in Q4 2023, we have observed the beginnings of a recovery. Since then, capital values have rebounded, registering gains in the range of 5-6% across sectors. • Looking ahead, and based on our current base case scenario—which factors in the prevailing economic outlook, inflation trends, and movements in bond yields— we anticipate a more sustained recovery. • We forecast a cumulative increase of above 9% in capital values across all property over the next two years.
280
240
200
160
120
80
Q1 2007
Q3 2007
Q1 2008
Q3 2008
Q1 2009
Q3 2009
Q1 2010
Q3 2010
Q1 2011
Q3 2011
Q1 2012 Office
Q3 2012
Q1 2013
Q3 2013
Q1 2014
Q3 2014 High Street Retail Q1 2015 Q3 2015 Q1 2016
Q3 2016
Q1 2017
Q3 2017
Q1 2018
Q3 2018
Q1 2019
Q3 2019
Q1 2020
Q3 2020
Q1 2021
Q3 2021
Q1 2022
Q3 2022
Q1 2023
Q3 2023
Q1 2024
Q3 2024
Q1 2025
Logistics
Source: Cushman & Wakefield Research
CONTENTS
Cushman & Wakefield
KEY POLICY PRIORTIES
CONTENTS
The U.S. is Among EU’s Main Trade Partners EU’s Main Partners for Trade in Goods
% Share of Extra-EU Imports
% Share of Extra-EU Exports
United States 19.7 %
China 20.5 %
Other 46.7 %
Other 48.4 %
United Kingdom 13.1 %
United States 13.7 %
United Kingdom 7.2 %
China 8.8 %
Switzerland 7.4 %
Switzerland 5.5 %
Norway 4.7 %
Turkey 4.4 %
Source: Eurostat (2023)
CONTENTS
Cushman & Wakefield
EU Trade with the U.S. EU Exports of Goods to the U.S.
% of the U.S. in extra EU exports
€ million
Germany
157,732 67,266 51,621 43,892 40,547 31,324 18,904 16,306 14,758 11,003
22.1 |||||||||||||||||||||| 22.2 |||||||||||||||||||||| 16.4 |||||||||||||||| 15.5 ||||||||||||||| 18.4 |||||||||||||||||| 13.1 ||||||||||||| 19.6 ||||||||||||||||||| 23.2 ||||||||||||||||||||||| 12.3 |||||||||||| 18.5 |||||||||||||||||| 25.5 ||||||||||||||||||||||||| 22.7 |||||||||||||||||||||| 19.8 ||||||||||||||||||| 12.6 ||||||||||||
Italy
Ireland France
45.8 |||||||||||||||||||||||||||||||||||||||||||||
Netherlands
Belgium
Spain
Sweden Austria Poland Denmark Finland Portugal Slovakia Hungary Romania Greece Lithuania Bulgaria Slovenia Croatia
9,918 8,429 5,525 5,235 4,873 4,371 2,149 2,117 1,886 1,043
Czech Republic
13.8 |||||||||||||
8.4 |||||||| 9.7 |||||||||
12.1 ||||||||||||
6.5 ||||||
867 587 519 502
3.1 |||
7.8 |||||||
Luxembourg
15.9 |||||||||||||||
Latvia
6.7 ||||||
Source: Eurostat (2023)
CONTENTS
Cushman & Wakefield
Trade Flows Between the EU and the U.S.
Impact on CRE
• The primary reason for imposing new tariffs on imports was the ongoing U.S. goods trade deficit with the bloc. • Goods trade exposure to the U.S. differs notably among EU member states. Countries with strong pharmaceutical sectors—such as Ireland and Belgium— are particularly prominent, with U.S. exports accounting for 11% and 6% of their GDP, respectively. • Tariffs are likely to have an uneven impact on CRE, depending on sector and country. Logistics and retail may face higher construction and operating costs due to higher prices on imported goods and materials, potentially delaying developments and squeezing margins. • Export-oriented countries like Germany and the Netherlands could see weakened industrial activity as trade slows. However, short-term stockpiling to avoid future tariff costs may drive temporary demand for warehouse space, offering some near term support for logistics assets.
EU-U.S. Goods Trade Balance
EU Trade with the U.S. by Product
600
200
150
500
100
400
50
300
(€ bn)
0
(€ bn)
200
-50
100
-100
0
Export 2014
Import 2014
Export 2024
Import 2024
-150
Other goods
Machinery & vehicles
Other manufactured goods Chemicals Energy Raw materials Food & drink
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Goods
Services
Overall balance
Sources: Eurostat, Moody's Analytics
CONTENTS
Cushman & Wakefield
Reversing Defence Spending Cuts Could Give a Vital Boost to Manufacturing Long-term Defence Spending Patterns Euro Area Industrial Production
Impact on CRE
• The Trump administration’s push for NATO allies to increase defence spending has prompted the EU to propose easing fiscal rules to allow greater investment in military capabilities. Europe aims to increase defence spending by up to 1.5% of GDP. The EU has committed up to €150 billion in loans, with additional resources from the European Investment Bank. • Rising defence spending could deliver a much-needed boost to Europe’s lagging manufacturing sector, supporting job creation and economic resilience. • Increased defence spending can have multiple ripple effects that support demand for CRE, and expansion of defence-related government departments and agencies can result in increased demand for office space. With defence budgets often tied to innovation in tech and engineering, increased spending may stimulate growth in high-tech corridors, pushing up demand for specialised office or lab space.
6
130
5
120
4
110
3
100
% of GDP
2
90
Index 2021=100
1
80
0
70
Jan-1980 Germany
Jan-1983
Jan-1986
Jan-1989
Jan-1992
Jan-1995 France
Jan-1998
Jan-2001
Jan-2004
Jan-2007
Jan-2010
Jan-2013
Jan-2016
Jan-2019
Jan-2022
UK
Euro area
Germany
Norway
Denmark
Netherlands
Trendline 13-18
Trendline 13-18
Source: Eurostat, Moodys Analytics
CONTENTS
Cushman & Wakefield
R&D Key in Addressing Europe's Productivity
Impact on CRE
• According to a report by the Kiel Institute, Euro area GDP could grow by 0.9% to 1.5% if defence spending increases from 2% to 3.5% of GDP. • Furthermore, a 1% increase in military spending as a share of GDP could boost long-term productivity by 0.25%, driven by R&D. R&D spending is identified as one of the three main factors to address Europe's lagging productivity, according to the Draghi report. • As R&D is a key driver of long-term productivity, regions benefiting from this investment may see stronger economic fundamentals, supporting occupier demand. • Given the links of productivity to GDP, every 0.5% increase to GDP typically boosts office net absorption by 0.8%, meaning more space was leased than vacated — a sign of demand growth.
R&D* Expenditure
Labour Productivity Per Hour Worked
100
U.S.
90
Germany
UK
80
Netherlands
70
Euro area
60
France
2022 U.S. Dollars PPP
50
Italy
Spain
40
0.00 1.00 2.00 3.00 4.00
(% of GDP)
Jan-1990
Jan-1993
Jan-1996
Jan-1999 Europe
Jan-2002
Jan-2005
Jan-2008 U.S.
Jan-2011
Jan-2014
Jan-2017
Jan-2020
Jan-2023
2011 2021
Source: World Bank, Conference Board TED *This indicator covers R&D conducted by resident companies, research institutes, universities, and government labs, including foreign-funded R&D but excluding domestic funds for R&D performed abroad.
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WHAT TO WATCH
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Inflation Expectations Euro Area Inflation Expectations Holding Steady So Far in 2025
Impact on CRE
• Unlike in the U.S., inflation expectations in Europe have remained largely stable during the first 100 days of President Trump’s term. • According to the ECB’s Consumer Expectations Survey, as of February 2025, the median household expects inflation to rise by 2.6% over the next 12 months. • Inflation expectations remain relatively well-anchored—an important factor for central bank policy. As long as expectations stay within a reasonable range, long-term bond yields are likely to remain at levels supportive of CRE transactions. This will be a key indicator to monitor in the months ahead.
12
10
8
6
4
2
0
Oct-2020
Oct-2021
Oct-2022
Oct-2023
Oct-2024
Apr-2020
Apr-2021
Apr-2022
Apr-2023
Apr-2024
Jun-2020
Jun-2021
Jun-2022
Jun-2023 3YR Ahead
Jun-2024
Feb-2021
Feb-2022
Feb-2023
Feb-2024
Feb-2025
Dec-2020
Dec-2021
Dec-2022
Dec-2023
Dec-2024
Aug-2020
Aug-2021
Aug-2022
Aug-2023
Aug-2024
Previous 1YR 1YR Ahead
Source: European Central Bank
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C&W TIME Score vs Investment Volumes – Europe All Property
Impact on CRE
• C&W’s TIME score Is a leading indicator, historically showing a strong correlation with CRE investment volumes. The latest reading for Q1 2025 holds steady at 3.0, maintaining its position at a critical inflection point and providing a snapshot of what to expect through Q3 2025. • Positive movement in momentum indicators—such as liquidity, the share of cross border capital, average deal size, and economic sentiment—signalled growing investor confidence. However, further gains in the overall score were tempered by weakness in both cyclical and growth indicators. Persistent inflation, sluggish economic activity, and early year declines in REITs’ performance contributed to the drag. Additionally, volatility in the 5-year swap rates created a more cautious investment climate. • The TIME score is an indicator to watch, tracking key market shifts in the CRE landscape. Looking ahead, should volatility subside, we could see the score begin to climb again—signalling renewed market momentum.
450
5.0
400
4.0
350
300
3.0
250
200
€bn
Score
2.0
150
100
1.0
50
0
0.0
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
2018 Q3
2019 Q1
2019 Q3
2020 Q1 2020 Q3 TIME Score (rhs) 2021 Q1 2021 Q3 2022 Q1
2022 Q3
2023 Q1
2023 Q3
2024 Q1
2024 Q3
Investment Volume (rolling 4-quarter basis)
Source: Cushman & Wakefield Research, MSCI RCA
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What it Means for Occupiers & Investors
Occupiers
Investors
• Maintain a long-term perspective: Continue to implement workplace strategies with a focus on long-term objectives. • Leverage tariffs and uncertainty: Use the current environment of tariffs and uncertainty to your advantage in shaping business strategies and negotiations. • Regardless of tariff impacts, it is essential for manufacturers to diversify supply chains as a prudent risk management strategy. • Large corporations are likely to capture increased market share post uncertainty. Position your organisation for growth by preparing for future opportunities. • Take a proactive approach by targeting high-quality assets and locations . As the availability of premium options becomes limited, this will become an increasingly competitive market. • Re-evaluate and re-assess your real estate strategy in alignment with your business outlook. Determine your organisation’s risk profile and tailor your approach accordingly to optimise space utilization.
• Focus on the investment horizon: Prioritise long-term real estate investments, as consistent value appreciation typically occurs over time. • Take advantage of market volatility: Overlook short-term market fluctuations and strategically acquire assets from sellers motivated by uncertainty. • Interest rates are unlikely to return to pre-pandemic levels: Seize opportunities when long-term debt dips below historical averages and strategically allocate capital. • Capitalise on short-term rate movements: Central banks are likely to continue normalising rates, with more cuts if economic conditions weaken. Leverage these changes to optimise your investment strategy. • Re-assess investment strategy: Evaluate your risk profile and begin executing an updated strategy tailored to current market conditions.
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SUKHDEEP DHILLON Head of EMEA Forecasting sukhdeep.dhillon@cushwake.com
KEVIN THORPE Chief Economist kevin.thorpe@cushwake.com
ABOUT CUSHMAN & WAKEFIELD Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2024, the firm reported revenue of $9.4 billion across its core service lines of Services, Leasing, Capital markets, and Valuation and other. Built around the belief that Better never settles , the firm receives numerous industry and business accolades for its awardwinning culture. For additional information, visit www.cushmanwakefield.com. ©2025 Cushman & Wakefield. All rights reserved. The material in this presentation has been prepared solely for information purposes, and is strictly confidential. Any disclosure, use, copying or circulation of this presentation (or the information contained within it) is strictly prohibited, unless you have obtained Cushman & Wakefield’s prior written consent. The views expressed in this presentation are the views of the author and do not necessarily reflect the views of Cushman & Wakefield. Neither this presentation nor any part of it shall form the basis of, or be relied upon in connection with any offer, or act as an inducement to enter into any contract or commitment whatsoever.
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