European Commercial Property
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Did Europeans leave cities (and have they returned)?

The pandemic and widespread use of remote working appeared to entice some Europeans to leave cities last year. However, the recent improvement in city mobility adds evidence to our view that this would prove short-lived, as cities remain attractive for a range of reasons other than just the proximity to work.
Amy Wood Property Economist
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European Commercial Property Update

CEE yield compression to continue into 2022

After surprising on the upside this year, we think that the broad-based decline in Central and Eastern European (CEE) property yields will continue in 2022, albeit at a more modest pace. But with higher bond yields eventually weighing on valuations, we expect property yields to edge up from 2023.

30 November 2021

European Commercial Property Valuation Monitor

Valuations worsen, but office and retail still fair value

Higher alternative asset yields and falls in office and industrial yields contributed to a further deterioration in property valuations in Q3. The decline in government bond yields since then, which has been reinforced by concerns about the new virus variant, could provide some reprieve in Q4. But looking further ahead we expect government bond yields to rise again and weigh on property valuations. Nevertheless, with the gap to government bond yields still wide, we don’t think this will result in upward pressure on property yields until after 2023. As such, we think there is still scope for property yields to fall before then, not only in the industrial sector where the outlook for rental growth is solid, but also for retail as valuations are supportive and rental prospects have improved.

29 November 2021

Non-euro European Commercial Property Chart Book

Scandinavia & Switzerland: Values to rise further

The rebound in economic activity and robust investor demand paved the way for a continued improvement in Scandinavian and Swiss property markets in Q3. Office and industrial values rose further, as strong competition pushed down yields. Retail yields also fell in Stockholm. But we think its too soon to call a turning point for retail. Indeed, retail rents also fell, indicating that conditions in the sector are still weak. Nevertheless, the better outlook for the other sectors means we think that all-property values will rise further. That said, with economic growth expected to slow in the coming months and structural shifts weighing on retail and office sectors, the pace of improvement is likely to moderate.

23 November 2021

More from Amy Wood

European Commercial Property Update

Oslo property returns have peaked

Rising government bond yields are set to squeeze valuations, resulting in increases in Oslo all-property yields after 2022. This will weigh on returns for Oslo property in the coming years, with structural headwinds limiting the extent to which rental growth can provide an offset.

30 September 2021

Non-Euro European Commercial Property Outlook

Scandi & Swiss: Returns to converge further ahead

The economic recovery and strong investor demand are supporting the property market upturn in Scandinavia and Switzerland. However, we expect 2021 to mark the peak for returns in most markets, except for Oslo where the start of the monetary tightening cycle in September means that this peak was likely last year. This reflects our view that structural shifts will weigh on rental value prospects for offices and retail. And while the rental outlook for industrial is brighter, we think stretched valuations will limit the scope for further yield falls beyond 2022. This will also contribute to a convergence in sector prospects in the latter half of the forecast period. As industrial capital value growth slows, we expect a pick-up in retail values, prompted by the improved outlook and supportive valuations. This will allow retail to edge ahead of industrial to the top of the returns table from 2023.

23 September 2021

Euro-zone Commercial Property Outlook

Sector fortunes to shift

While the Delta variant has slowed economic activity in other parts of the world, this has not yet been the case in the euro-zone, and we are cautiously optimistic that the bloc will continue to grow. This will support the property market upturn, albeit offices and retail face structural challenges that will limit the rental recovery. Stronger rental prospects for industrial mean we think that the sector has the most scope for yield compression in the near term, though strong demand for prime assets should allow office yields to edge a bit lower too. However, further increases in yields will make some retail assets look increasingly attractive by year-end, prompting small yield falls in the next few years. The upshot is that industrial is expected to outperform over the next couple of years, but stronger capital value growth beyond 2022 will result in retail returns emerging as the strongest.

16 September 2021
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