Recession to act as a drag on occupier markets and rents

Over the past few months we have seen little reason to alter in either direction our euro-zone commercial property forecasts. With no resolution in sight to the region’s debt crisis, we think that all member states will slip back into recession in 2012 and/or 2013, with negative ramifications for occupier demand and rental values everywhere. Lower expectations for rental growth, together with a general shift down the risk curve, will put upwards pressure on property yields. Thus falling capital values look set to be a major drag on total returns which, on average over the next two years, we expect to be negative in all euro-zone property markets.