Europe’s fiscal crisis will dent the occupier market recovery

The weakening economic outlook for the euro-zone economy is likely to act as a brake on the recovery in commercial property markets over the next year or two. Rental value growth will moderate in most markets and in the weaker peripheral economies, further falls in rental values are likely. Low bond yields will help to support property valuations, but the scope for further yield compression now looks very limited. Rather, the uncertain occupier environment is likely to be reflected in abnormally high property/bond yield spreads over the next two years.