Investors are pulling out of emerging Europe as they struggle to overcome financial liquidity constraints, according to the latest RICS Global Property Survey released on Thursday. Transaction activity plummeted at the fastest pace of any developing region in the first quarter of 2008, despite emerging European markets continuing to see relatively healthy expansions in occupier activity.
Investors are pulling out of emerging Europe as they struggle to overcome financial liquidity constraints, according to the latest RICS Global Property Survey released on Thursday. Transaction activity plummeted at the fastest pace of any developing region in the first quarter of 2008, despite emerging European markets continuing to see relatively healthy expansions in occupier activity.
Investment bidders per property fell across all countries outside of Turkey, pushing yields higher across most city markets on the back of credit uncertainty and a reduced appetite for risk. In Western Europe, the biggest declines in competitive bids per property were seen in the Republic of Ireland and France, with only Cyprus still reporting tighter investment conditions.
Developers are responding rapidly to the changing dynamics in Western Europe as France registered a notable slowing in pipeline development across all sectors, with declines also recorded in the UK, Spain and the Netherlands. In emerging Europe, however, pipeline development is still rising as the rental outlook remains upbeat.
The strongest growth in commercial property rents in Europe was registered in Russia and Turkey where rents are expected to maintain the greatest momentum into the summer. Across emerging Europe, rents are expected to rise with the exception of Hungary and Romania, where slightly weaker rents are expected. In Western Europe, Germany, Austria and Portugal are expected to see the strongest growth in rents into mid-year with outright declines across the UK, Italy and the Republic of Ireland whilst stagnating in France.
'What started in the developed world has spilt over into investment activity across several emerging markets,' said Oliver Gilmartin, RICS member and senior economist. 'With prime yields across some emerging European cities now on a par with those in developed markets it is little surprise that investors have turned cautious on a relative valuation basis when risk is factored into the equation.'
