07 Jul 2017
Amidst the drama of recent political events, it's perhaps unsurprising that Europe’s economic recovery has partly slipped under the radar. But, having lagged most advanced economies significantly throughout much of the post-financial crisis era, growth does appear to have gathered healthy momentum over the last two years.
Solid economic growth during this period has largely dispelled consensus forecasts which, owing much to political uncertainty emanating from Brexit as well as elections in the Netherlands and France, had expected a noticeable slowdown in the euro area economy thorough the end of 2016 and into this year. This, however, failed to materialise, with the recovery instead gathering pace.
Going from strength to strength
The positive tone to recent economic data has been accompanied by a smart improvement in confidence across the commercial real estate sector, a point evidenced through the findings of the RICS Global Commercial Property Monitor.
Since 2015, European markets have consistently returned some of the most positive results worldwide, leading the way on both occupier and investment sentiment. Furthermore, feedback from our professionals is clearly pointing to this solid performance being sustained going forward.
The next six months - a prediction
The reported strength of investment demand across the Eurozone would appear to be consistent with a further increase in valuation levels across the commercial property sector through the remainder of 2017.
Indeed, given its the past relationship with commercial property prices, the RICS Investment Enquiries series is signalling capital value growth of around 5% this year (see chart below). Consequently, the prospect of continued strong price returns from commercial real estate should ensure this asset class remains an attractive proposition for investors in the near term.
In addition, the survey results also suggest occupier demand is currently rising at the fastest pace since the survey’s inception in 2008, supporting the outlook for rental growth and income returns.
Looking ahead, as occupier demand captures firms’ interest to acquire new space before recruiting additional employees, this indicator has tended to lead employment figures, suggesting growth could accelerate from an annual rate of 1.5% at present to something approaching the 2% mark over the next six months.
Explore the whole picture
For more details on the drivers of the recent turnaround in Europe, and to find out which national markets are likely to outperform in terms of capital value and rental growth over the coming years, download the full report below..
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