Commercial property prices across Europe took a further hit in the second quarter, with yields rising to their highest since 2006. At the same time, investment volumes plummeted by 63% on the same period last year, according to new research by Cushman & Wakefield.
Commercial property prices across Europe took a further hit in the second quarter, with yields rising to their highest since 2006. At the same time, investment volumes plummeted by 63% on the same period last year, according to new research by Cushman & Wakefield.
Growing uncertainty over financing - and pricing - has hobbled deals, with larger sales and portfolio sales proving to be most affected by tighter lending conditions.
In total, there were around EUR 64.9bn worth of property deals in the first half of the year, down from around EUR 130bn in the same period last year, according to David Hutchings, head of European research at Cushman & Wakefield.
'We think there could be around EUR 150bn to EUR 155bn of deals transacted this year. However, the longer investors wait to place their capital, the bigger the risk that they may decide to place it somewhere else - and not in property,' he said.
The deal volume in Western Europe fell by 49.6% in the first half of the year, compared to the same period last year. In the UK, where the price correction has been one of the most dramatic, commercial deals dropped off by 60.6% in the first half, compared with 55.8% in Germany and 51.2% in France. In countries such as Greece and Ireland, the declines have been even worse, with deals falling by 96.9% and 74.4% respectively.
Over in the Eastern Europe, the story is marginally sunnier, largely due to growth in Russia and Bulgaria. Burgeoning investor interest in Russia has seen transactions soar by 69.7%. In Bulgaria, deals have risen by 23.7%. Eastern Europe was the only region to post a gain, with the deal volume up by 7.2% in the first half.
The Nordic region has also fared better than Western Europe, largely due to the resilience of Denmark and Finland, with the region posting a fall in deal volume of around 41.3%.
Occupational markets remain more resilient, with prime rents in Europe up 8.9% in the year to June, although the rate of growth slowing, with an increase of 4.6% per annum in the second quarter. There is also a marked difference in the level of rental growth in Western and Eastern Europe. In the west, rental growth grew by 2.3% per annum in the second quarter - far lower than the 16.8% recorded in the east and 11.2% in Central Europe. Retail is also slowing to a similar pace to offices but still remains ahead overall in the year to June, with 10.9% rental growth, compared to 9.9% for offices and 2.6% for industrial stock.
On average, European prime yields moved out by 17 basis points (bps) in the second quarter, taking the rise since last June to 39 bps. Typically, yields in Western Europe have risen by 53 bps, compared with 20 bps in Central Europe and a 57 bps fall in Eastern Europe. Both office and industrial yields have risen by around 50 bps compared to just 25 bps for high street shops.
However, international buyers are exercising caution, with cross-border deals across Europe falling by 55% this year, compared with a fall in 44% in domestic spending.
Click on the link below to read 'Global deal volumes down 41% in H1 2008 - JLL'
