Major European markets stabilise ahead of expectation: DTZ

European capital city rent indices are indicating stabilisation across all sectors, according to DTZ Research. The Retail and Industrial sectors are returning positive growth figures of 0.4% and 0.13% respectively for Q4 2009, and office markets are expected to turn positive in Q1 2010. This is a result of general stabilisation across the board with some markets returning small levels of growth as a result of over-correction.

Rental value falls in prime European capitals have been much lower than have been seen in the wider market. Most of the major markets such as London, Paris CBD and Berlin have levelled off ahead of other European markets, explaining smaller than anticipated falls in the prime rental index. Latest figures from DTZ Research highlight that peak to trough falls for office, retail and industrial are expected to be in the region of 22%, 6% and 3.5% respectively.

Magali Marton, Head of DTZ Research, Europe and Continental Europe said: 'Many major office markets have levelled out ahead of expectation as parity between supply and demand is being reached. Additionally, many markets rapidly re-priced in the face of falling demand. Retail rents are being driven by the tourism effect. Prime tourist destinations, such as central London, are defying domestic consumer spending figures as currency devaluations stimulate tourism.'

Latest figures from DTZ's research mirror recent economic indicators that many major economies are approaching a turning point. Both office and industrial sectors around the globe have either reached, or are approaching bottom of the rental cycle as many markets have reached a balance between supply and demand, albeit at a much lower level than the peak of the cycle. During the quarter, global office rents fell by 2%, industrial fell by 1% and significantly, retail grew by 0.2% on the back of gains in Asia Pacific and levelling out in Europe.

However, global capital city prime rents are highlighting the continuing trend for the flight to safety. Many local markets are seeing capital cities bucking the global trend. Where wider economic drivers imply more significant falls, prime rents in the main markets have held up far better than anticipated. London City, Paris CBD, Hong Kong and Sydney have all levelled off during Q4 where many tier two cities have continued to fall.