European property investment markets have experienced fewer forced sales than expected as the pricing correction in the region has operated on a more rational pace this year in comparison to the latter part of 2007, according to Savills European research division.

European property investment markets have experienced fewer forced sales than expected as the pricing correction in the region has operated on a more rational pace this year in comparison to the latter part of 2007, according to Savills European research division.

The acceleration of market softening has been checked as European investment funds with low leverage, Middle Eastern investors and German fund have remained active, particularly in the UK where the price correction has been sharpest.

Savills said, however, that total investment volumes are down significantly due to the a decrease in portfolio translations and a general preference for deals below EUR 100mln. Volumes dropped by 55% in France, 50% in UK and 26% in Germany, comparing transaction levels in the first quarters of 2007 and 2008.

Giles Wilcox, head of Savills European cross border investment, said: 'Rising yields are expected to stimulate renewed investor interest as some investments are getting closer to their fair value. However, transaction volumes have dropped due to lower availability of debt and we have seen some retraction from perceived riskier markets such as Eastern Europe.'

The report indicates that the driver for the investment markets is rental growth, especially in the Western European markets, and it identifies 'quality commercial property let to strong covenants' as a key area of demand. The retail sector was the slowest to react to the pressure of price correction, with retail warehousing yields in Germany, Greece, Poland, Italy and Turkey continuing to compress in the first quarter of 2008. However, other areas showed signs of softening.

Eri Mitsostergiou of Savills European research adds: 'The latest economic forecasts project overall growth to ease across Europe, and for this reason we expect to see increased focus on the occupational markets. In Eastern Europe, where there has been greater momentum associated with higher growth, we are seeing yields stopping their downward trend, which will continue until the economic situation becomes clearer.'