Luxury is outperforming across European real estate. Whether it’s high-end hotels or prime shopping streets, the rapidly growing ranks of the global rich and a huge wealth transfer from baby boomers to their children has helped cushion the blow from the property correction unleashed by higher interest rates, according to research published Wednesday by broker CBRE Group Inc. The relative strength of luxury property comes even as high-end fashion, jewelry and liquor brands have been hit hard by a slowdown in Chinese travel and consumption as well as increased barriers to trade.
That’s hit the likes of LVMH, which posted its worst quarter since 2020. “Our research tells us that luxury outperforms, including at a real estate level, and will continue to do so,” said Tasos Vezyridis, CBRE’s head of European thought leadership. “The slowdown we’ve experienced in 2024 looks to be short-term and concentrated in certain markets outside of Europe.
As a result, we expect London, Paris, Milan and Amsterdam to both set trends and influence the aspirations of affluent consumers worldwide.” The advent of higher interest rates prompted a major pullback by institutional investors from commercial real estate, as they waited for valuations to correct to reflect the higher cost of capital. But high-net-worth investors and increasingly risk-taking private equity firms have pounced on what they see as a once-in-a-generation opportunity to acquire parts of Europe’s prime postcodes.