The Commercial Property market in the EU and the Euro area is poised for positive growth in 2015 despite the backdrop of on-going economic uncertainty in the region, according to Knight Frank’s European Market 2015 Forecast report:
Office occupier markets are likely to continue to move in line with wider economic trends with the Nordic countries and the Baltics currently seeing a significant improvement in occupier sentiment, and the UK finally seeing a pick-up in its regional city markets.
The most encouraging trend is the rebound in some of the peripheral markets, Ireland and parts of Southern Europe, with Dublin and Madrid in particular recording solid rental increases in 2014 and further growth expected in 2015.
Darren Yates, head of global capital markets research, commented; “The really good news for both occupiers and investors is that rents in most markets remain lower than their pre-recession peaks – in some cases significantly below. This should provide a further boost to activity in 2015, with more occupiers looking to take advantage of good deals, while investors will seek to cash in on better rental growth prospects as the economic outlook continues to improve.”
Despite the recent dip in economic performance, major French and German cities are also expected to perform well on the back of limited availability, with development yet to accelerate significantly in either country.
The Russia-Ukraine crisis meanwhile continues to weigh heavily on those countries and, while property markets in the wider Central and Eastern European region have remained relatively untouched by the conflict, plentiful supply has constrained rental growth in key cities such as Prague and Warsaw.
In the investment market, early indications show that transaction volumes for 2014 are likely to exceed the €160bn mark – around 10% up on 2013. A significant amount of capital continues to target commercial real estate and our forecasts suggest a similar rate of growth in 2015, with total volumes expected to be in the range of €175-180bn.
All the main commercial sectors are attracting strong interest, while specialist sectors such as hotels, healthcare and student accommodation are becoming increasingly part of the mainstream property universe.
Andrew Sim, head of European Capital Markets, commented; “The forecasted 10% rise of commercial investment into European markets is a positive start for Q1 2015. We have witnessed some strong recovery in cities such as Madrid and Dublin and we are expecting demand to generally broaden out to smaller cities and investors looking to move increasing up the risk curve to target good quality secondary stock in addition to development opportunities.”