Marktbericht Europa Oct09

Despite improvements in the wider economy, the European real estate market is facing difficult times.

Executive Summary

• Europe’s economies are slowly pulling out of recession and forecasters are starting to revise growth projections upwards for 2010. While this is good news, declining GDP remains troublesome, as does the prospect of deflation. A long and drawn out recovery remains the central view.
  
• There are signs that stability is returning to real estate investment markets. Cap rates in prime office markets have stabilized or even fallen across Europe. Banks are sticking to conservative lending terms while mostly rolling over existing loans that mature.
  
• Deal flow remains subdued. Without many distressed sales, few properties are being put up for sale, and investors appear in no rush to re-enter the market.
  
• The listed sector has benefited from a strong run in the wider equity markets. Some larger names are now trading at a premium to NAV. However, there are still doubts as to the sustainability of the rally in the listed sector, given the weak outlook for occupier markets.
  
• Local market dynamics continue to play a relatively minor role when it comes to the occupier market. The wider macroeconomic landscape remains the key driver for tenant demand, although city specific stories should come to dominate as the recovery takes hold.