ING REIM sees broad-based recovery in European prime rents

The decline in prime yields seen in major European commercial real estate markets this year, in anticipation of a recovery in occupier markets, could be justified by a genuine turnaround in 2011, but significant economic threats remain, ING Real Estate Investment Management has said in its latest European View research report.

Eugene Philips, managing director Research & Investment Strategies at ING REIM Europe said: 'Prime rents have stabilized or have begun to recover for the best buildings in select markets and a more widespread recovery is expected in the coming year. This apparently benign picture for prime space, however, masks the still present rent incentives, and also low occupier demand for below-prime properties.'

Philips added that the initial boost to the European economic recovery from exports, needs to be underpinned by domestic demand to be sustainable, but in this respect the outlook is modest as consumers are not yet ready to open their wallets as they are confronted by major uncertainties surrounding future household income. Overall, the outlook is brighter for real estate markets in France, Germany, the Netherlands and northern Europe than for markets in Southern Europe.

'We are most positive on relatively stable retail investments in most regions of continental Europe, on prime offices in France and on high quality industrial properties, particularly in France and Germany', Will Rowson, Chief Investment Officer at ING REIM Europe said. 'Given their solid fundamentals, several residential markets could also be interesting for investors from a risk/return perspective', he added.