European RE returns at six-year high - IPD

Western European commercial real estate returns in 2006 were the highest in at least six years, as prices of shopping centers and offices rose, according to London-based Investment Property Databank (IPD). Investments in malls, offices and warehouses returned 13.3% in local currency terms, compared with 11.8% in 2005, IPD said in an e-mailed statement. The 2006 return was the highest since IPD started its pan-European index in 2001, Bloomberg reported.

'The local currency return reflected the broadest spread of national market performances since the start of the index,' IPD director Ian Cullen said in the statement. Investment in European real estate jumped 39% last year to EUR 242 bn, according to property advisor Jones Lang LaSalle. Europe overtook the US as the favoured area for commercial real estate investment last year for the first time in at least four years, it said.

The weakening of the dollar boosted returns for US investors to almost 28%, lagging just behind the 29% achieved by yen-based investors. Japanese buyers also had the best returns over three years, while dollar-based investors got the best returns over five years, said IPD. In euro terms returns improved to just more than 14% from almost 13% in 2005. British pound investors received an 11.9% return, up from 9.4% in 2005.

The income return for all currencies fell to 5.1% from 5.5%. IPD's Pan-European Index covers 14 western European countries, including eight that use the euro, and is based on a sample of properties worth EUR 625 bn. The UK accounted for 45% of the market.

Shops and malls were the best performing type of commercial real estate for a fourth straight year, said IPD. The survey covered Austria, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK.