Euro area property in the last quarter of 2017 was enjoying one of its best moments since the financial crisis, says UK-based chartered surveyor group RICS. Of all global markets monitored it registered the strongest investment and occupier sentiment and shows a strong outlook for 2018.
The Royal Institution of Chartered Surveyors said in its latest global commercial property monitor that sentiment remained generally positive across most global real estate markets in 4Q17. Its Occupier Sentiment Index was positive in 28 of the 34 countries, while the comparable figure for the Investment Sentiment Index was 27.
"The Eurozone is enjoying one of its best moments since the financial crisis," it said in a release, providing strong sentiment and occupier figures. But contributors from European cities consistently highlight a lack of supply of good quality property. Vacancy rates in the office sector are at their lowest level since 2008. "This is clearly having an impact in underpinning the current pricing environment in the more expensive markets; it may also partly explain the relatively sanguine assessment of the prospects in the face of the likely shift in the direction of monetary policy from the ECB as the year develops," RICS said.
Berlin, Amsterdam, Frankfurt and Madrid continue to be most attractive to investors and tenants across the world. However medium term indicators point to some rotation toward smaller central European markets. Cities such as Sofia, Budapest and Prague also produced firm results.
RICS Chief Economist Simon Rubinsohn commented: "Concern around valuations does persist in several markets but even where this is the case there is little sense from respondents of a material correction in pricing any time soon. The contrast to this continues to be more the challenging environment for real estate in parts of the Middle East which is, among other factors, a function of the somewhat more chequered macro picture."
On the UK, RICS said that despite reports suggesting that the decision to leave the EU is likely to result in the loss of fewer jobs than earlier estimates indicated, respondents in a number of European cities continue to report enquiries from British businesses regarding the availability of space. This is particularly so in Amsterdam, but also in Warsaw, Dublin, Paris and Frankfurt. Around one-quarter of contributors from central London continue to report approaches by firms looking to relocate at least part of their business overseas. However RICS added: "The London market remains attractive to investors even though it continues to be seen as being expensive on most valuation metrics."