Solid economic growth prospects in most of Europe bode well for occupier demand and prime rents in the next few years. However, better growth is likely to be a double-edged sword for commercial property, with monetary policy starting to tighten and bond yields moving higher. This will limit property yield falls and capital gains. Indeed, capital values in both Western Europe and Emerging Europe will be broadly flat over the forecast horizon. Major exceptions are likely to be Russia – with capital growth of more than 25% - and Switzerland – with double-digit falls in capital values.
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