Government bond yields polarised further during 2011 as investors sought to invest in 'safe-haven' markets such as Switzerland, Germany, Sweden and Norway.
Annual GDP growth was reasonably strong in most European economies last year, although the economic deterioration experienced in H2 2011 will manifest itself more clearly in 2012.
Pan-European total return for direct prime real estate was 9.4% in 2011. This compares to -8.1% for equities and 6.5% for bonds.
Transaction volumes increased by 7% compared with 2010 as the quoted real estate sector became net investors into commercial property for the first time since 2007 at a pan-European level.
The differential between prime real estate in major cities and secondary properties in regional locations grew as the 'flight to quality' saw yields for prime assets decline further in 2011.
Central Europe enjoyed the strongest total returns in 2011, driven to a large extent by the performance of Poland.
The offices sector again produced the best returns in 2011at 10.5%, followed by 7.1% for industrial and 4.3% for retail.
Oslo was the best-performing market in 2011 in both the offices and retail sectors as prime yields fell markedly.
Source : AXA Real Estate