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Consensus catching up to the view of a weak recovery

The latest IPF Consensus forecasts are consistent with our view that prime office rents will fall this year and the recovery in 2022 will be weak, even as the easing of virus restrictions allows economic activity to rebound. However, outside of Emerging Europe, we are more pessimistic on the outlook after 2022.
Amy Wood Property Economist
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More from European Commercial Property

Non-Euro European Commercial Property Chart Book

Scandinavia & Switzerland: Value gains set to slow

The recovery continued in the Scandinavian and Swiss economies and their property markets in Q1. It was a record first quarter for investment in Scandinavia. And annual capital value growth was robust for office and industrial, while retail values rebounded from their pandemic lows. However, pent-up demand from the pandemic will wane and the sharp rise in bond yields is already squeezing property valuations. As such, investment activity should slow over the course of the year, while we think property yields will reach their troughs.

24 May 2022

Non-Euro European Commercial Property Chart Book

Emerging Europe: Rental growth steps up

CEE economies and property markets started the year on a solid footing. Strong quarterly increases in office and industrial rents supported CEE all-property values in Q1, though yield compression slowed. However, rental growth is likely to drop back further ahead as economic growth decelerates, supply rises and structural changes take their toll. And we expect all-property yield compression to come to a halt, given increases in bond yields and signs of a shift in investor sentiment towards some CEE markets. As such, capital value growth is likely to slow sharply by year end. Property Drop-In (19th May): What will rising interest rates mean for commercial property returns in the US, UK and Europe? Join our 20-minute briefing on the outlook for returns on Thursday. Register now.

19 May 2022

Euro-zone Commercial Property Chart Book

Slower yield compression weighs on capital growth

Euro-zone commercial property values made further gains in Q1. Quarterly rental growth was strongest for industrial, though office and retail rents also rose. However, the pace of yield compression reduced, limiting capital value growth. And we expect this slowdown to continue, given the weaker economic outlook and expected rises in interest rates and bond yields, which mean property yields are likely to reach their trough this year. Property Drop-In (19th May): What will rising interest rates mean for commercial property returns in the US, UK and Europe? Join our 20-minute briefing on the outlook for returns on Thursday. Register now.

18 May 2022

More from Amy Wood

European Commercial Property Update

Has Athens been pushed off track by COVID-19?

After gaining ground since 2018, the recovery in Athens’ prime property values has stalled. However, we think that the catch up with the euro-zone will continue, albeit at a slower pace than in recent years.

6 July 2021

European Commercial Property Update

Vaccine passport no silver bullet for prime high streets

Lingering restrictions on travel mean that weakness in foreign tourist spending will continue to weigh on retailers’ incomes in tourist-dependent retail markets this year. This supports our view that prime retail rents will fall, even as the domestic economic recovery gets underway.

1 July 2021

European Commercial Property Valuation Monitor

Rise in bond yields weighs on property valuations

The marked rise in government bond yields drove a deterioration in property valuations in Q1, particularly in industrial markets where property yields also fell steeply. And with government bond yields edging up further in Q2, valuations will continue to be squeezed. That said, we expect most euro-zone government bond yields to edge lower in the second half of the year and think the economic recovery will support equities. As such, there is scope for some improvement by year-end. This will support lower office and industrial yields. However, without further rises in retail yields, this is unlikely to be enough to attract investors to retail assets.

2 June 2021
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