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European Commercial Property

Non-Euro European Commercial Property Chart Book

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

Non-Euro European Commercial Property Chart Book

Emerging Europe: All-property values jump in Q4

Sharp falls in property yields and an improvement in rental growth pushed CEE all-property values in Q4 up almost 5% q/q, the strongest quarterly growth rate since 2007. This was largely driven by the strength of industrial, but office values also increased strongly. Property values are likely to rise further in 2022, but at a slower pace. Decelerating economic growth, large supply pipelines and structural changes will limit rental growth. And further rises in interest rates and bond yields means that the turning point for property yields is getting closer. That said, the downside risk to Moscow property has greatly increased with the invasion of Ukraine. Note: Russia-Ukraine Drop-In (today at 09:00 EST/14:00 GMT): We’re holding an online briefing on the crisis and its economic and market impact today at 14:00 GMT. Register here.  

24 February 2022
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Non-Euro European Commercial Property Chart Book

Scandinavia & Switzerland: Less scope for yield falls

There was a material improvement in the Scandinavian and Swiss property markets over 2021. Prime office and industrial capital value growth accelerated. And while prime retail values still declined, this was at a slower pace than in 2020. Oslo was an exception, as rising bond yields restricted the pace of yield declines. That said, a decline in Oslo retail yields in Q4 meant that retail values rose for the first time since 2017. Looking to 2022, the economic backdrop will remain supportive, with GDP in the region already well-above its pre-pandemic level. However, we expect structural shifts to continue to cast a shadow over office and retail rental growth. And rising bond yields will limit the scope for further property yield declines, particularly in Oslo and Stockholm.

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.

Non-Euro European Commercial Property Chart Book

Emerging Europe: More positive on near-term pricing

CEE property values completed the final leg of their recovery in Q3, fully reversing the nearly 5.5% peak-to-trough drop in 2020. With rents barely moving on the quarter, falls in yields did all the heavy lifting in driving capital values higher. CEE yields across all sectors have now dropped back since the start of the year, with the decline in retail yields a notable exception in Europe. Therefore, in contrast to our forecast in our last Outlook, we no longer expect office and retail yields to end the year higher. And with both office and retail rents expected to return to growth next year, there is a risk to our forecasts that yields could fall further. That said, given the cooling economic recovery and structural shifts from e-commerce and remote working, the rebound in rents will be modest at best. Moreover, after 2022, rising property yields on the back of higher bond yields mean that the next few quarters are likely to be as good as it gets for property values.

Non-Euro European Commercial Property Chart Book

Scandinavia & Switzerland: Strong investor demand

Data for Q2 confirm that, as with the economic recovery, the property upturn is more advanced in Scandinavia than in western Europe. Investment activity grew strongly, even when excluding a large one-off deal.  Prime all-property capital values also rose as rents surpassed their pre-virus levels while yields declined slightly. That said, this improvement was mostly driven by the industrial sector. Looking further ahead, we expect to see some slowdown in industrial occupier demand as economic activity and online shopping behaviour normalise. As such, given our view that structural factors will weigh on the retail and office sectors in the coming years, we expect the pace of all-property capital value growth to slow in H2.

Non-Euro European Commercial Property Chart Book

Emerging Europe: Retail rental falls still on the cards

In line with the economic recovery, there were growing signs that property markets have turned a corner in Q2. All-property rents rose on the quarter, while the all-property yield dipped on the back of lower industrial yields. On an annual basis, industrial rents rose, while retail rents fell less sharply. Our forecast for the economic recovery to continue in H2 bodes well for occupier and investment activity. But we still expect the retail sector to struggle. Indeed, the weakness of tourist spending and the competition from e-commerce are likely to continue to drag on retailers’ incomes. Therefore, we think retail rents will end this year lower, along with office rents. In contrast, we forecast further industrial rental gains.

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