24 NOV 2017
RICS Global Commercial Property Monitor, a leading indicator of conditions in commercial property occupier and investor markets around the world, signals robust momentum behind the investment market in Europe during the third quarter of 2017, with German cities leading the way.
Germany moved to the top position in Q3, with Berlin and Frankfurt both seeing a surge in investment enquiries. Munich also saw a strong (albeit more modest in comparison) rise in investor demand. Although a majority of respondents in Germany sense conditions are likely close to peaking in the current cycle, strong capital value growth is still anticipated across each of these cities over the next 12 months.
Similarly, strong investment demand growth is outstripping that of supply (in net balance terms), producing firmly positive capital value expectations in Budapest, Dublin, Lisbon and Sofia.
France experiences a solid investment market momentum at present but RICS experts are more cautious on the outlook for secondary markets.
Occupier market momentum remains firmest in Europe and, in particular, across CEE markets. Hungary, the Czech Republic and Bulgaria (accompanied by Spain and Portugal) recorded the strongest positive readings during Q3. This significant rate of improvement is in keeping with robust economic growth across these markets, with each posting an annual rate of GDP growth around, or in excess of 3%. Smartly rising economic output is driving occupier demand higher and supporting elevated rental growth expectations.
In Italy, occupier demand occupier market increased in each area of the market, with growth strongest in the office and retail sectors. Meanwhile, demand for industrial space picked up at a comparatively more modest pace.
The Occupier Sentiment Index (a combined measure designed to gauge overall momentum) rose to +18 in Q3, from +10 in the previous quarter. This marks the strongest reading since the survey’s inception (2008), pointing to an acceleration in occupier market momentum.
The outlook for CEE markets is still positive, according to the RICS Commercial Property Monitor. Results for Q3 2017 show that both occupier and investment demand are still on the rise across the region. The peak of the current cycle is, however, undoubtedly getting closer.
The rental outlook in Paris remains stronger than the national average. Indeed, all prime markets are anticipated to chalk up solid rental growth, led by prime office and industrial space. Projections are more or less flat for secondary rents, although the retail area of the market exhibits slightly negative expectations.
The Q4 2017 Global Commercial Property Monitor will be open for responses on 13 December. Click here to participate.