EUROPE - Industrial real estate in Austria, Germany and Sweden is expected to deliver some of the best risk-adjusted property returns in Europe over the next few years, according to Aviva Investors.

The company's 'Macro and Property (MaP) Risk Ratings' report, made public for the first time, estimated that risk-adjusted returns between 2012 and 2016 would be highest in the Swedish retail and industrial sectors and the industrial sectors in Germany and Austria.

According to the report, Sweden boasts the greatest relative economic strength across Europe, while the commercial real estate markets in Hungary, Ireland and Spain carry the highest property risks.

The report also pointed to "relatively high" macroeconomic risks in Italy and Spain, adding that risk-adjusted returns were expected to be low in the retail and office sectors due to weakness in demand for commercial space.

Chris Urwin, global research manager, said capital growth would be slightly negative in most markets as a result of the euro-zone debt crisis.

"It's not surprising to see this has resulted in the higher-yielding industrial markets offering higher potential total returns than other sectors, making them a relatively attractive investment," he said.

At the country level, he said the Nordic countries and Germany made "compelling" investment cases.

"We currently view them as safe havens, and investors can benefit from having an exposure to prime real estate that provides secure income streams," he said.

"While not cheap by historic standards, these markets continue to offer relatively good value on a risk-adjusted basis."