My subscription
...
Filters
My Subscription All Publications

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.
Amy Wood Senior Property Economist
Continue reading

More from European Commercial Property

Non-Euro European Commercial Property Outlook

Scandi & Swiss: Rising interest rates to hit values

The rapid turnaround in the interest rate environment has led us to revise down our expectations for property performance in Scandinavia and Switzerland. Property valuations deteriorated sharply in Q1 and are expected to come under more pressure given further rises in bond yields. We now think property yields will reach their troughs this year and will rise by a cumulative 30bps-35bps over the following few years. With structural changes weighing on the office and retail sectors, rental growth is unlikely to be strong enough to prevent a material slowdown in capital value growth, with falls likely in 2023-24. This will contribute to a sharp drop in returns after this year. Within this, industrial is still expected to perform best, but the margin of outperformance will reduce significantly compared to recent years.

27 June 2022

Euro-zone Commercial Property Outlook

Rising interest rates to speed up property correction

The weaker economic outlook and larger increases in interest rates are expected to weigh on property performance. With valuations under increasing pressure from sharply rising bond yields, we think that property yields will reach their troughs this year and rise by a cumulative 35bps at the all-property level over the following few years. Rental growth is unlikely to be able to provide much offset to prevent falls in capital values in 2023-24, with structural changes dragging on the retail and office sectors. This will leave annual total returns languishing in low single digits on average over the forecast. Beyond 2022, we think retail will overtake industrial as the best performing sector, while offices are expected to underperform.

23 June 2022

European Commercial Property Update

Will property resist the effects of deglobalisation?

A recent MSCI article speculated that real estate investment could buck the deglobalisation trend given distinct features of the asset class, though we are not convinced that will bring many benefits. In view of the wider interest, we are also sending this European Commercial Property Update to clients of our UK & US Commercial Property Services.

14 June 2022

More from Amy Wood

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

European Commercial Property Update

Italian capital values to take a hit

Italian prime property values continued to make solid gains in Q1. However, with the economic outlook downgraded and larger increases in property yields expected over the next couple of years, capital value growth is set to slow sharply and by more than in other euro-zone markets. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.

11 May 2022

European Commercial Property Update

Office yields most vulnerable to rising interest rates

While the low level of prime industrial yields compared to history leaves the sector vulnerable to rising interest rates, a fair value analysis that incorporates our expectations for rental growth suggests that office yields could come under more upward pressure in the next few years.

4 May 2022
↑ Back to top