European Commercial Property
...

European Commercial Property

Non-euro European Commercial Property Outlook

Non-euro European Commercial Property Outlook

Emerging Europe: Industrial loses crown after 2021

Our forecast for the economic recovery to maintain its momentum in H2 bodes well for occupier and investment activity. But while we think industrial rental growth will pick up, we still expect office and retail rents to end this year lower. Beyond 2021, while we expect rents to return to growth across all sectors, large supply pipelines and structural changes will keep a lid on rental growth. And with bond yields trending higher on the back of monetary policy normalisation, we expect broad-based property yield rises from 2023 across all sectors. We therefore think capital values will barely grow over the next five years. As a result, total returns will be driven by income returns, with retail overtaking industrial as the strongest sector after this year.

24 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

Non-euro European Commercial Property Outlook

Emerging Europe: Industrial still a bright spot

With virus restrictions set to be eased further, we expect the recovery in economic activity to gather pace from Q3, which should give occupier markets a lift. But the pick-up will not be enough to prevent falls in office and retail rents this year. And further out, large supply pipelines and structural change will keep rental values in check. Meanwhile, with monetary policy set to normalise earlier than we had initially anticipated, we have now pencilled in sharper property yield rises across all sectors from 2023. As a result, we expect capital values to barely grow over the next five years. In turn, total returns will be dominated by income returns, with industrial outperforming offices and retail, echoing our sectoral rankings for western Europe.

25 June 2021
More Publications

Non-euro European Commercial Property Outlook

Scandi & Swiss: Upgrades to Scandi industrial values

With the recovery in economic activity already underway and further easing in virus restrictions to come, the outlook for occupier demand is encouraging. However, with structural factors also at play, this is likely to provide more support to demand for industrial assets, while the rental recovery in the office and retail sectors will lag. These divergent rental prospects mean we think there is more scope for yields falls in the industrial sector than for offices. And, despite looking relatively better value at current pricing, we think retail yields will rise further. With monetary policy forecast to remain accommodative over the next five years, we don’t expect broad-based increases in property yields until at least 2025. The exception is Norway, where rising interest rates and bond yields are set to put upward pressure on property yields from 2023. The upshot is that we think all-property returns will be weak compared to recent years, but industrial will outperform across the board.

Non-euro European Commercial Property Outlook

Emerging Europe: Less than stellar recovery in values

Following a year marked with sharp falls in retail rents and rising retail and office yields, the next few months for property values will continue to be dismal. We have pencilled in another drop in all-property capital values this year. With mass vaccinations allowing virus restrictions to be eased, economic activity should rebound sharply in H2, giving occupier demand a lift. However, we think that large supply pipelines and headwinds from the shift to more remote working and e-commerce will curtail the recovery in rents over the forecast horizon, particularly in Warsaw and Prague. The combination of softer rental growth and higher yields from 2022 will leave capital values barely growing over the next five years. Indeed, our forecast for CEE all-property capital value growth to average just 0.2% p.a. over the forecast period pales in comparison to its previous five-year average of 4% p.a..

26 March 2021

Non-euro European Commercial Property Outlook

Scandi & Swiss: No rise in all-property values in 2021

The Swiss and Scandinavian economies and their property markets are likely to weather the pandemic better than many others in Western Europe. We expect all-property values in the region to hold steady or see small falls this year. However, even as economic activity returns to normal, the impact of the pandemic will be felt. A faster transition to online shopping will weigh on retail, while it will buoy industrial markets. Meanwhile, more remote working will limit the recovery in office markets, albeit this impact is likely to be smaller than in some other Western European markets. On balance, property returns will be weak over 2021-25 compared to recent years, but industrial will outperform.

25 March 2021

Non-euro European Commercial Property Outlook

Emerging Europe: Not out of the woods yet

While vaccine developments have improved the economic outlook for the latter half of next year, the near-term weakness in economic activity means that property values will remain under pressure over the coming quarters. But even once occupier demand improves, we think that the rental recovery in offices and retail will be muted. For offices, large supply pipelines and a shift to more remote working in Warsaw and Prague will keep a lid on rental growth. And while the impact of growing e-commerce on retail rents will be limited in most Emerging European markets, after sharp falls this year, we think that the pace of rental growth will be slow by past standards. Similarly, while we expect industrial rents to grow in 2021, given the large supply pipeline, the rental outlook over the next five years is subdued. Bringing all this together, following a 7% fall in 2020, we think that CEE all-property capital values will barely grow over the next five years.

18 December 2020

Non-euro European Commercial Property Outlook

Scandi & Swiss: Property recovery to prove gradual

The positive news on the vaccine has improved the economic outlook and should allow output in the Swiss and Scandinavian economies to recover to their pre-virus levels in late 2021. This will support the rental recovery. However, structural factors mean that it will be gradual. Indeed, although a faster online transition will boost industrial, it will be at the expense of retail. And more remote working will weigh on office markets, albeit this impact is likely to be smaller than in some other Western European markets. In turn, we expect property yields to be under upward pressure in the near term. But further ahead, the rental recovery, supportive valuations and low policy rates should allow office and industrial yields to fall. On balance, capital values will improve over the forecast horizon, but growth will be weak by past standards.

1 to 8 of 26 publications
See More ↓