German property market remains weak: RICS

The near-term outlook for the German commercial property market remains a little downbeat, according to the latest Global Real Estate Weekly report from RICS. Capital values and rents are expected to continue edging lower, according to the RICS survey.

A series of business surveys due next week is expected to indicate that the economy continues to expand, but that the pace of growth may be moderating. In January unemployment increased from 8.1% to 8.2% while consumer confidence fell from a net balance of -16 to -18 in the European Commission’s monthly sentiment survey. The still fragile state of the German economy was also underlined in the recently released Q4 RICS Global Commercial Property Survey which showed that tenant demand continues to fall while incentives offered to tenants are becoming more generous.

Nevertheless, the economy should continue to grow during 2010 given still very loose monetary policy (the ECB refinance rate is 1%), a third fiscal stimulus
package (the Growth Acceleration Act was recently announced worth EUR 8.5 bn or 0.25% of GDP) and a stronger external environment. This, in turn, is likely to result in a gradual improvement in the underlying climate for both commercial property rents and capital values.