European commercial property market on the rebound

Sentiment in the global real estate market improved during the first quarter of 2011, reflecting spreading economic recovery. In Europe, Germany was one of the strongest performers, reports the latest RICS Global Commercial Property Survey, published on Friday.

The survey shows that real estate professionals, particularly in emerging Europe, appear increasingly bullish towards the occupier market. In addition, the survey suggests a positive outlook for Q2 2011, with more countries expecting rents to rise and capital values to increase than in previous quarters.

In Europe, investment in commercial property improved across the region during the first months of 2011, with 14 of the 19 countries covered by the survey reporting a rise in investment demand. Germany experienced the sharpest rise, while in Poland, Scandinavia, Russia and the Czech Republic demand remains positive and fairly stable.

In Ireland, Greece, Spain, and Portugal, investment activity is still falling; however, as prices move up in other parts of Europe, some risk appetite is returning and investors may selectively look in these countries in search of better deals. Demand from occupiers continues to improve in the region, however, rental expectations remain relatively cautious in most markets, partly due to all available space that still needs to be absorbed. Russian respondents remain the most optimistic, and in France, a shift in business confidence is having a positive impact in terms of occupier demand and rental expectations.

Despite the government bailouts peppering peripheral Europe, these countries remain in the grip of sovereign debt crises and their real estate markets remain fragile.

'Sentiment continues to improve across much of the global commercial property market, which reflects the fact that more of the world is now beginning to enjoy economic recovery,' said Simon Rubinsohn, RICS Chief Economist. 'Real estate in some countries still remains under considerable pressure, but elsewhere it is booming to such an extent that governments have been forced to take action to try and slow things down. This divergence between the leaders and laggards is something that we expect to persist for some while to come.'