No boom, but better times to come

The economic outlook for the euro-zone has brightened since our previous Analyst, prompting us to increase our forecasts for commercial property capital values and total returns. Indeed, our less pessimistic view on growth prospects point to healthier occupier market conditions and, in turn, better investment market sentiment. It is too soon to rule out further, marginal falls in rental values in some of the region’s weaker markets. But these should be the exception rather than the rule. And we now think that yields are more likely to mark time than rise over the next 18 months, meaning that any short-term weakness in capital values will be modest. Prospects in both the near and medium term appear brightest in Austria, Belgium and Germany, weakest in France, the Netherlands and Italy.