Marktbericht Europa Jan10

There is still a large amount of uncertainty as to the speed and shape of Europe’s economic recovery over the coming quarters.

Executive Summary

• The economic recovery is gaining traction across Europe, but it is not without downside risks. One particular concern is how authorities manage the gradual withdrawal of their extraordinary fiscal and monetary policies and how the private sector reacts.
  
• Banks are under less pressure than they were a year ago to pare their commercial real estate holdings. Partly as a result, better-capitalized banks are easing lending standards.
  
• An influx of cross-border, cash-rich investors are on the prowl for elusive prime real estate in core Western European markets, pushing cap rates below long-term averages. The resulting rise in prices for core properties of all types has created growing concerns that investor sentiment is getting ahead of fundamentals, which could lead to another asset bubble followed by a correction.
  
• Listed firms by-and-large have successfully repaired balance sheets and reduced leverage levels. Prices of REIT shares rallied strongly in 2009 and now many are looking to buy assets.
  
• Space markets have generally held up better than expected, given the collapse in GDP growth. With the development pipeline limited by the withdrawal of construction financing, rental rates could recover sooner than expected. One drawback to that scenario is that employers have not made substantial cuts to payrolls during the recession, and therefore may not hire robustly during the recovery.
  
• Transaction volume will recover somewhat in 2010, in part because investors anticipate rental growth, particularly in prime locations. However, the path will likely be bumpy.