Central Europe likely to outperform

Over the next few years, a gradual recovery in economic activity should support rising occupier demand and rental values in most non-euro-zone European commercial property markets. But with high levels of spare capacity still evident in many markets, that recovery in rental values may be slow to gather momentum in both Western and Emerging European markets. However, property yields in Emerging markets look less vulnerable to a rise in risk-free rates than do markets in the West. Therefore, our forecasts envisage that the medium term outlook for capital values and total returns will typically be a little stronger in Emerging Europe than in Scandinavia or Switzerland.