The ongoing decline in capital values in Western Europe has shifted eastward, with the coming months likely to see significant price falls across many Central and Eastern European markets, according to RICS Global Commercial Property Survey published this week.
The ongoing decline in capital values in Western Europe has shifted eastward, with the coming months likely to see significant price falls across many Central and Eastern European markets, according to RICS Global Commercial Property Survey published this week.
During the last quarter, prices in Europe plummeted across all sectors of the commercial real estate market, with the sharpest falls registered in Ireland, Slovakia and the Scandinavian countries. Cyprus was the only European market to resist the negative trend. In Western Europe, price declines continued at a record pace driven by steeper drops in the retail and industrial markets which overtook the office sector in terms of the pace of price falls. Around 75% more respondents reported declining prices compared to 63% in the previous quarter.
The bigger story, however, was the sharp declines in rents across the previously resilient Eastern European markets. The collapse in lettings activity and worries over financial instability have raised fears that income streams to landlords are likely to come under significant pressure on growing voids and tenant default.
This has compounded pressure on values which saw a near doubling in the pace of price falls across the Eastern European region, apparent across all three sectors. Rental expectations are now negative across all world regions, with weaker occupier demand likely to lead to further rises in available space and looser market conditions across all emerging and developed markets. In Europe, rental pessimism is bleakest in Portugal, Spain, Hungary, Belgium and the UK. Germany remained a relative outperformer with less negativity towards both rents and tenant demand as available space continued to decline.
