EUROPE - Turkey and Russia now outclass other European property markets for both development and investment, indicating a shift away from "Old Europe" towards new holdings and developments, suggests a report co-published by the Urban Land Institute and PwC.

Details of the Emerging Trends in Real Estate report indicate Hamburg and Munich remain in the top five locations for investment, as does Paris - but only just. Berlin and Frankfurt also made the top 10, reflecting the fact that Germany's economic recovery is well underway.

London fell to 15th place for investment. Despite prevarication elsewhere on the likely impact of the US economic slowdown on Europe, the report claims London closely reflects US economic woes, including falling consumer spending and house prices and financial services sector turmoil.

"The UK economy is starting the year under the yellow flag," says the report. "Although a full-blown recession is unlikely, growth will slow markedly. Fewer bankers means less office space. London does not currently have a good story."

More broadly, the report claims markets in Europe have become "more globally connected and more vulnerable to economic shifts occurring in other parts of the world". However, the report's authors see continued traction in still largely local European markets.

"Europe is reckoned to provide fair hunting, more so for direct investments," it says. "People who must spend go to Asian countries; people who are not under pressure continue to do deals in Europe."

Emerging Trends in Real Estate is based on a survey of 500 European property professionals.

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