Emerging Trends report: long haul ahead for European real estate

Europe's real estate industry is cautiously optimistic about prospects in 2010, but the road ahead will be long and arduous with no guarantee of a lasting recovery. That is the tenor of the Emerging Trends in Europe 2010 report, which will be presented at the annual ULI Europe trends conference in Paris on 2 February.

Based on surveys and interviews with well over 600 investors, developers, financiers and property managers, the report is produced annually by ULI Europe in cooperation with PricewaterhouseCoopers.

'This year there is a sense of cautious optimism. Sentiment regarding investment prospects has stabilised and although sentiment regarding development continues to decline, it is a less dramatic fall than that witnessed last year,' said John Forbes, real estate leader in Europe, Middle East and Africa at PwC and co-author of the report. 'The key issue is the occupier side of the equation. Investors are nervous and they are concentrating on the deeper, more liquid markets,' he added.

As credit eases slightly and capital values steady, deals are being done again, prompting some companies to expect better profitability in 2010. But the overriding sentiment is one of extreme caution with many respondents saying that 2010 will be ‘another year when we need to remain absolutely diligent about everything to do with our business’. There will be no more quick wins: good old fashioned property skills will be back in demand, and real competence and experience will count again.

The caution is based on the expectation that economic recovery in Europe will be sluggish and fragile, with unemployment remaining high, consumer spending restrained and investment low. ‘Europe’s economic recovery is underway, but it will be sluggish and uneven,’ said ULI Europe chairman Alexander Otto. ‘We are looking at a crawl back up the hill, and how much values recover will depend on where Europe ends up economically against global competition.’

In terms of individual cities, Munich and Hamburg are ranked by the report as having the best prospects for existing property portfolios, a ranking they also held in 2009. London tops the league for new investments, followed by Munich and Hamburg. Istanbul scores best in terms of development prospects, followed by Munich and Hamburg.

For an interview with John Forbes about the Emerging Trends report and its main findings, see the February edition of PropertyEU Magazine. Click on the link below to subscribe