European commercial prime property returns predicted to be highest in nearly a decade

Despite on-going uncertainty around Greece’s future in the Euro, on a relative pricing basis real estate remains attractive compared with other fixed income assets and investor demand continues to be strong according to the research. 
DTZ predicts the industrial commercial property sector will be the best performing, with returns of 8.2 per cent p.a. forecast over the next five years, followed by retail (6.4 per cent p.a.) and offices (6.0 per cent p.a.). Capital values are also expected to rise at a pace of 1.7 per cent p.a. until the end of 2019.
Fergus Hicks (pictured), DTZ’s Global Head of Forecasting, says: “Despite the prolonged evolution of the Greek crisis, overall we are seeing very strong investment demand for commercial property. This is keeping downward pressure on commercial property yields and we have revised our European yield forecasts lower as a result.”
Magali Marton, DTZ’s Head of EMEA Research said: “Moving forward, we expect commercial property rents across Europe to rise 4 per cent this year and 3 per cent next year, marking modest uplifts on the back of firmer economies. We have seen occupier demand pick up in many markets, while there is a shortage of high quality buildings, which are combining to put upward pressure on rents. Overall, we think retail has the best rental growth prospects over the next five years.”
Matteo Vaglio Gralin, Associate Director DTZ Research, commented: “On the occupier side of the market, we expect growing economies and contained supply to push up rents in most commercial property markets across Europe. If the Eurozone can successfully resolve the Greek crisis and get over the turbulence generated by it, firms should have the confidence needed to implement expansion plans and increase headcount. London offices stand out as a market where we expect double digit rent rises this year.”

Source: Property Funds World