C&W index reaches ‘fairly priced’ for first time since 2009

According to the latest issue of the index, which analyses 122 European office, retail and logistics markets, 30 markets are underpriced, 65 are fairly priced and 27 are fully priced.

The logistics sector offers investors the greatest scope to find underpriced assets, accounting for 17 of the 30 underpriced markets.

Moscow tops the underpriced European markets table in Q2, ranking first and second for its retail and office sectors respectively. Sofia (office), Dublin (logistics), and Barcelona (logistics) complete the top five.

The UK, with one from 28 locations (Bristol offices), and France, with two from 10 (Paris and Marseilles logistics), have the fewest underpriced markets.

The five most fully-priced markets in Europe are Istanbul (office), Geneva (office), Vienna (office), Milan (retail) and Rome (retail). High bond yields in Turkey pushed the fair return for property to almost double the forecast return. Rome and Milan’s retail markets have a very low prime property yield, both at 2.75%, making them look less attractive on a relative pricing basis.

Across the 122 markets surveyed, Cushman & Wakefield ranked 53% of logistics sector markets as underpriced compared to 14% of office and 14% of retail markets. Conversely, 3% of the logistics market is fully priced, compared with 37.5% and 16.5% of office and retail markets respectively.

Looking at the European market regionally, Central and Eastern Europe (CEE) has the highest number of underpriced markets with more than half given that rating. Germany, Benelux and the Eurozone periphery all have a good balance of fairly priced and underpriced.

Mark Unsworth, head of EMEA Forecasting at Cushman & Wakefield, said: 'This latest research shows that as property yields continue to fall, property valuations at the prime end of the market are becoming stretched, which is consistent with the advanced stage of the property cycle.'