EUROPE - European commercial real estate recovered to deliver a pan-regional return of 8% in 2010, a significant improvement on 1.4% in 2009, according to Investment Property Databank (IPD).
The finding marked the 10th year the IPD Pan-European index has been in existence and showed that the total return for European property over that period was 6.1%.
Capital growth returned to the European markets in 2010 after two years of decline at 2.2%, but Peter Hobbs, head of business development at IPD, warned that this rise was more a product of re-pricing and improving investor sentiment, rather than any recovery in the occupier market.
Hobbs said the improvement was driven almost entirely by "yield compression", while rental value growth remains weak across most markets.
He added: "The range in returns across the continent, while not as much as in recent years, is interesting due to the variations in the composition: about half of the 17 markets reported saw a return to positive capital growth in 2010, and there was a very strong relative performance of France, Sweden and the UK.
"It is worth noting, however, that no European market's 2010 recovery even approaches a return to the peak value levels seen before the downturn.
"The volatility of certain markets, such as Ireland, the UK and Spain, and the relative stability of others, notably Germany and Switzerland, shows an interesting comparison of the types of potential investment market across Europe.
"They present choices in terms of portfolio construction, with the more volatile markets offering potentially higher returns for the less risk-averse investor."
The top six markets in the index - Germany, the UK, France, Switzerland, Netherlands and Sweden - account for almost 75% of the market share, and the strong relative performance of the index was driven to a large extent by the UK.
Accounting for 20% of European commercial property, the UK alone contributed 290 basis points to the total return figure. France also made a significant contribution to returns (1.5%), but the slow German performance acted as a drag on returns.
The office and retail sectors dominated the index, accounting for 42% and 30%, respectively, with retail delivering a robust return of 10.1% and offices lagging behind with returns of 7.3%.
The industrial sector, which makes up a far smaller section of the market (7%), also delivered a strong return of 7.6%.
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