European Commercial Property
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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.
Amy Wood Property Economist
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European Commercial Property Update

ECB rate hike unlikely to move the needle for property

While we now expect the ECB to start its tightening cycle earlier, we don’t think the change is significant enough to prevent further property yield compression over 2022-23, albeit at a slower pace than in 2021.

18 January 2022

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Gradual flexible office recovery underway

Having been hit hard in 2020, improving economic conditions supported flexible office take-up in 2021, albeit caution and consolidation limited the net increase in space. While we expect take-up to remain low compared to the pre-virus period, we think it will improve in 2022, with demand for flexibility and the lower cost of desk space in some markets encouraging a shift towards flexible space.

17 January 2022

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Estimating the carbon transition risk to property values

Real estate potentially has a significant role to play in helping achieve ambitious climate targets. We have estimated the size of the risks in the transition to net zero for the commercial property markets that we cover. This risk varies widely across markets and sectors, but suggests that the costs, at less than 8% of current capital values, are significant but not insurmountable. In view of the wider interest, we are also sending this European Commercial Property Update to clients of our UK and US Commercial Property services.

14 January 2022

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Consensus still underestimating impact of remote work

The IPF Consensus forecasts for euro-zone prime office rental growth in 2021 have been revised up, consistent with the more positive recent data. However, expectations were revised down slightly for the next couple of years. Even so, we still have a more downbeat view on the outlook after 2022.

15 November 2021

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German retail vacancy to remain elevated

The latest data show that conditions in the German retail sector are improving. Nevertheless, we think vacancy will be slow to reverse as pandemic shifts lead to weakness in in-store demand, particularly in Frankfurt and Munich.

8 November 2021

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How pandemic changes will affect European cities

Europeans are returning to cities, though the return to offices has been much slower and this has had negative effects on city retail. Looking ahead, weaker demand for office and retail will weigh on performance in cities with large concentrations of these assets. However, prospects are better for cities that are attractive to more than just workers and that can fill the gap left by excess office and retail with other property types where the outlook is more positive. The cities which we think will perform best in the coming years as a result are Stockholm, Paris and Berlin. In view of the wider interest, we are also sending this European Commercial Property Focus to clients of our UK Commercial Property service & UK Housing service.

2 November 2021
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