European Commercial Property
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European Commercial Property

Euro-zone Commercial Property Chart Book

Euro-zone Commercial Property Chart Book

Rental recovery picks up pace

The recovery in euro-zone commercial property values picked up in Q3, supported by a small fall in yields and an improvement in the pace of rental growth. While retail rents held steady, the quarterly rise in both office and industrial rents was the largest since 2019 Q4. Demand for prime assets and low interest rates will continue to support the property sector. However, with economic activity expected to slow over the next six months or so, and the outlook for the retail and office sectors still clouded by structural change, we think that the property recovery will struggle to maintain its current pace.

16 November 2021

Euro-zone Commercial Property Chart Book

Tentative signs of a turning point for property

All-property capital values rose for the third consecutive quarter in Q2, leaving them less than 1% below their pre-virus level. The improvement was driven by a decline in all-property yields, though rents also rose slightly on a quarterly basis for the first time since Q1 2020. The outlook is encouraging for occupier demand and investment in the coming quarters given economic activity is expected to rebound strongly. However, depressed tourist spending and online shopping will drag on the retail recovery. And higher vacancy and more remote working will limit the improvement in the office sector.

18 August 2021

Euro-zone Commercial Property Chart Book

Competition for industrial assets bids down yields

With the faster pace of vaccination paving the way for a rebound in economic activity, the prospects for occupier markets have improved. However, structural changes mean that the recovery in the office and retail sectors will be gradual. In contrast, we expect the industrial sector to benefit from higher demand as the economic recovery gets underway and healthy online spending. These divergent sectoral prospects were clear in investors’ pricing decisions in Q1, when they continued to bid down prime industrial yields, while office and retail yields held broadly steady.

20 May 2021
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Euro-zone Commercial Property Chart Book

Pandemic widens sectoral divergences

Despite the sharp hit to economic activity, euro-zone prime commercial property values were comparatively unscathed last year, falling by just 2%. However, this hides large differences in performance across the sectors. Indeed, industrial property values grew by 11%, while retail values fell by almost 20%. Looking to 2021, we expect property values will be under downward pressure in the near term as tight virus containment measures weigh on economic activity. But if we are right that the vaccine rollout allows economies to rebound in H2, values should improve thereafter. That said, we think that structural headwinds will hold back the recovery in the retail and office sectors. On balance, we think that euro-zone capital value growth will stabilise by year end.

16 February 2021

Euro-zone Commercial Property Chart Book

Second lockdown a further blow to retail

The industrial sector aside, investment activity and occupier demand failed to recover from sharp Q2 falls in Q3, even as lockdown measures were eased. Indeed, in the retail sector, the fall in prime rents gathered pace and yields edged up. In sharp contrast, industrial rental growth picked up in Q3. With the second virus outbreak triggering widespread lockdowns across the euro-zone, which are expected to last into next year, we forecast further declines in property values, particularly for retail. As such, despite the potential boost to economic activity from the latest vaccine development, we cannot yet discount further repricing in property markets.

12 November 2020

Euro-zone Commercial Property Chart Book

Retail property values move sharply lower

Investment and occupier demand plunged further in Q2. As expected, the retail sector bore the brunt of the impact, with capital values falling by almost 9% y/y. This drove down all-property capital value growth to just 3% y/y, the lowest since 2012 Q4. (See Chart 1.) However, the impact on property values outside of retail was more modest. That said, with the rebound phase of the recovery coming to an end, we expect occupiers to continue to adjust their requirements to lower levels of activity and the still-uncertain outlook. We think that this will result in more significant declines in rents and rises in yields across all sectors and many markets in H2.

19 August 2020

Euro-zone Commercial Property Chart Book

Larger hit to values yet to come

Prime euro-zone rents and yields held broadly steady in Q1, with many agents noting it was not possible to provide a robust reassessment of values. This marked the end of period of positive rental growth and yield declines in many markets. Indeed, there were already signs that occupier demand slowed, even though lockdowns were not fully in place until the end of March in many countries. With economic activity at its lowest in Q2, we think that a more substantial deterioration in rents and increase in yields is on the way. Although lockdowns are being loosened, the recovery is expected to be slow and uncertainty will remain elevated, which we think will prevent property values from bouncing back quickly.

20 May 2020

Euro-zone Commercial Property Chart Book

Further slowdown in capital value growth ahead

Although euro-zone rental value growth slowed in 2019, further falls in property yields supported capital values. Despite the soft economic backdrop, capital value growth should hold up in coming quarters. However, a further slowdown in rental growth and rise in retail yields will weigh on capital value growth later in the year.

21 February 2020
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