For the coming year, CB Richard Ellis expect further increases in investment volumes in the UK, German and French markets. The adviser made the prediction in a preview of its forthcoming report ' After the Storm: Where Next for European Property?'. It pointed out, however, that the growth rate in the UK may appear smaller in percentage terms than in some other European countries after significant growth in 2009.

For the coming year, CB Richard Ellis expect further increases in investment volumes in the UK, German and French markets. The adviser made the prediction in a preview of its forthcoming report ' After the Storm: Where Next for European Property?'. It pointed out, however, that the growth rate in the UK may appear smaller in percentage terms than in some other European countries after significant growth in 2009.

Germany, which has seen strong growth in transactions over the last few months of 2009, could also figure as one of the fastest growing markets in 2010, the adviser said. 'Investor demand in France is undoubtedly strong, but growth in transactions is expected to be held back by the limited amount of available stock.'

Markets such as Ireland and CEE, where 2009 activity has been very subdued, could easily see larger year-on-year increases in completed transactions in 2010 simply because of the low base they are starting from. Sector trends are more complicated. In the first half of 2009, investment activity in the office sector declined most sharply, mainly as a result of the difficulty in financing large transactions and the uncertainty over the outlook for occupier demand, especially in financial services and associated business services.

In terms of the potential to see some positive movement in values, the UK looks likely to lead other markets as investors respond to the substantial pricing correction which has occurred, the nature and length of leases in the UK, and the current value of the pound. Indeed, this is already happening, with the CB Richard Ellis Monthly Index up by nearly 7% since July.

'There is still some variation in the extent to which individual markets have repriced, but in general prime yields are showing clearer signs of levelling off,' said Nick Axford, Head of EMEA Research and Consulting. 'Indeed, in some highly liquid markets that have seen substantial repricing - notably London and Paris - the direction of yield movement is now downward. The rental market remains more difficult with economic conditions still weak, although even here the degree of decline seen in the third quarter is moderate by recent standards.'

The limited availability and stringent terms of debt finance (and the related fact that some lenders are still struggling to manage their existing debt books) means that, to a large extent, highly-leveraged investors and developer-traders are out of the market. The adviser said it would have expected more activity from opportunistic vulture funds and value-add players looking to acquire sites or income management opportunities at this stage of the cycle, with values having fallen steeply. However, the combination of the limited number of vendors and uncertainty over the short-term economic outlook have restricted their scope.

As a result, the European real estate investment market is being dominated by equity buyers, mostly seeking well-let assets in core markets. German Open-ended Funds are very active and activity is also growing from the Sovereign Wealth Funds. Institutional investors are likewise growing in importance, both directly and though indirect funds. Finally, the recovery in stock markets means that the listed property companies have switched from being net sellers to net buyers.

There is also some evidence that cross-border investors’ appetite for real estate is still strong, the adviser said. The fact that in Central London, for example, around 80% of 2009 transactions have been to foreign buyers is a good illustration of this. It is also interesting to note that in contrast to 2006/07, when investment from outside Europe was mostly from the US, current demand is global, with investors from all parts of the world active in the search for prime assets.