European Commercial Property

Expect no change in euro-zone office yields until 2022

The slowdown in euro-zone growth means that rental growth will be weaker and that bond yields are likely to be lower. The net effect of these factors is a downward revision to our forecasts for office yields, which we now expect to be below their current levels by the end of 2021, providing that the euro-zone does not experience a recession. Although softer rental growth will limit capital value gains, total returns of around 5% p.a. in 2019-21 will look attractive on a relative basis.
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Euro-zone Commercial Property Outlook

Economies reopening but headwinds remain for property

The easing of virus restrictions has brightened the economic outlook and prospects for occupier markets. And with rises in inflation expected to be temporary, we think monetary policy will remain highly accommodative over the next five years, keeping the environment supportive for property yields. However, the structural headwinds in the retail and office sectors mean that the rental growth prospects are poor outside of industrial. Further, despite looking undervalued, we think that retail yields need to rise further before assets look attractive. As such, we expect only a weak recovery in all-property values over 2021-2025. Within this, industrial will be the standout performer.

18 June 2021

European Commercial Property Update

Are green commercial leases the future?

With emission targets needing to be met by 2030, the race is on for the real estate sector to decarbonise. By forcing tenants and landlords to share the risks, benefits and costs of environmental policies, green commercial leases are a promising tool, and widespread adoption seems likely. That said, we don’t expect a significant impact on commercial property performance yet.

In the view of wider interest, we are also sending this publication to clients subscribed to our US and UK Commercial Property Services.

10 June 2021

European Commercial Property Update

Hawkish CEE policy shift to push up property yields

Our expectation for more aggressive monetary tightening in Central and Eastern Europe and the subsequent upward pressure on bond yields mean that we now expect property yields to rise by more from 2023.

7 June 2021

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Commodities Weekly Wrap

Middle East tensions back in the spotlight

Having surged this week, the price of oil could rise further in the near term if tensions between Iran and the US continue to escalate. At the same time, the price of gold is benefitting from an increase in safe-haven demand and a weaker US dollar. The prices of most industrial commodities also rose this week as both the Fed and the ECB signalled looser monetary policy and President Trump announced that he would meet with President Xi on the sidelines of the G20 meeting. Markets will be closely watching events in the Gulf over the next few days. Elsewhere, the G20 summit in Osaka, Japan, gets under way on Friday and all eyes will be on the Trump-Xi meeting. Even if some sort of trade agreement is reached between the two leaders, we do not think it will last. A deal which would be acceptable to both sides appears increasingly remote. We suspect that by early next year, nearly all of China’s exports to the US will be subject to tariffs. Finally, the biannual OPEC and OPEC+ meetings that had been scheduled for next week have been postponed until 1st-2nd July, reportedly because Russia was keen that the meetings be held after the G20.

21 June 2019

Africa Economics Weekly

Easing cycle gains momentum, no news from SONA

Inflation figures released in South Africa and Nigeria this week supported our view that policymakers in both countries will loosen monetary policy later this year. Rates elsewhere are already falling; the Bank of Mozambique cut by 25bp this week. President Cyril Ramaphosa’s State of the Nation Address was disappointingly light on substance, suggesting that divisions within the ANC are hobbling policymaking.

21 June 2019
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