Despite ongoing economic and political turmoil, the European commercial real estate market has shown resilience in 2011 with 5% growth in invested stock, measured in local currency. Despite this growth, there were sharp contrasts in trends; UK invested stock levels shrank (-1% in local currency) whilst the Continent showed a wide range of growth rates, from -6% for the Baltic states to +19% across the CEE countries. Surprisingly, European debt continued its increase in 2011. But, because equity growth was more robust, some deleveraging was still accomplished over the year. At 58%, the European loan to value ratio is only modestly down from its 62% peak in 2009.
Investment transaction volume growth in Europe slowed down in 2011 (+9%). Investors' appetite has focused on the mature markets in Europe (UK, Germany and France). However, relative to stock size, the Nordics and CEE markets were the most liquid last year.
Our global investors‟ and lenders‟ surveys show that market players are generally less optimistic compared to one year ago; but sentiment in Europe is much less positive than in the other regions. Lenders expect less new lending and tighter conditions, with a further decline in existing loan performance. Investors expect less net investment activity and fear a decline in bank lending. New European banking regulations are not helping matters as we expect them to force more deleveraging. This forced deleveraging will increase the existing debt funding gap across key European markets. However, increased activity from non-bank lenders is expected to bridge the gap, in part.
Source : DTZ (Groupe UGL)