EUROPE - King Sturge's European first quarter survey is the latest to report prime property retaining its value despite a sluggish macro recovery across the continent.
Although most European economies had emerged from recession in Q1, eurozone GDP increased by a meagre 0.2%. Yet the rental-and-yields survey found no change in prime rents across most cities.
A few markets reported an upward trend, including the City of London at 11%. Both the City and the West End face an "encouraging" short-term outlook with further rental increases this year.
Central and Eastern European (CEE) economies have to date ridden out the recession much better than their mature European counterparts, according to the report.
"Most CEE economies are set to expand again in 2010 and all experience a healthy recovery over the medium term, sustaining growth rates significantly higher than the more mature economies in the west," it said.
The report cited rental growth in Bucharest amid limited supply. Even in cities such as Warsaw, which saw a decline in Q1, the report forecast "little, if any" downward adjustment over the next two quarters.
Prime yields have shifted in London and Paris with product scarcity keeping pressure on the investment market and taking yields to 5.5%. Elsewhere they remained stable. "It is likely that markets across Europe will continue to recover and experience further inward movement, but any upturn is expected to be slow," the report said.
In contrast to office, industrial experienced significant downward rental pressure during the survey period, with 11 cities registering a decline. Among them was Paris with a 4% fall. Dublin, Milan and Madrid each registered a 5% fall.
Despite severe rental falls in Central Europe - industrial rents in Budapest fell 9% - the report claimed occupier activity "would steadily improve" through the rest of the year as investor interest shifted away from office and retail in France, Germany and the UK towards prime logistics.
"With pricing now at attractive levels, investment interest and activity is slowly gaining momentum," it said.