European property markets

Citation

(1998), "European property markets", Property Management, Vol. 16 No. 3. https://doi.org/10.1108/pm.1998.11316cab.005

European property markets

European property markets

Keywords Commercial property, Europe

A new report European Commercial Property Markets Overview 1998, published by international property advisers DTZ Debenham Thorpe, provides an objective summary of the commercial property markets in 18 European countries. The report gives a concise and informative analysis of the office, retail and industrial sectors. While the markets retain local characteristics, a number of common trends are apparent.

Occupier demand in office sector helps stabilise rental growth and encourages supply of modern stock

Demand in the office sector in Western Europe remained steady or rose as a result of a combination of corporate expansion, restructuring of operations and occupiers taking advantage of relatively low rents. Falling availability of modern space helped stabilise prime rents and encouraged supply of new space. A two-tier market will remain a feature of most locations and an increase in new space driven by occupier demand will worsen the prospects for less efficient second-hand space. In central and eastern Europe, the process of evolution is continuing and in a number of markets rents are stabilising at more sustainable levels.

Retail warehouses, factory outlets and leisure projects emerge as key growth areas

Internationalisation of markets is boosting demand for quality retail space which in turn, is helping to sustain prime rents. Demand is strongest for quality high street and shopping centre locations.

Like the office sector, polarisation between prime and secondary space will remain a feature of most locations. Supply of new space will continue to be limited in most markets, particularly in city centres, with a number of countries pursuing restrictive planning policies.

Industrial markets remain subdued

With the exception of a few markets, namely, Ireland, The Netherlands, Spain and the UK, activity remained subdued and rental levels fairly flat.

The sector is characterised by owner occupation which has been encouraged in the current climate not only by the availability of low-cost financing but also by a shortage of quality modern premises in the comparatively dynamic distribution sector. Current market conditions are unlikely to change substantially in 1998.

Cross-border investment activity increases and spreads to new markets

The combination of positive yield gaps, relatively cheap finance, strong occupier demand and strong rental growth enhanced the attractiveness of property which fuelled investment activity and encouraged the spread of cross-border activity to new markets.

German and US funds were especially prominent while offices and retail remained the preferred targets. The development markets of Greece, Turkey and Central and Eastern Europe made further progress with the arrival of new investment grade product although the widespread involvement of the institutions remains limited.