The last quarter of 2008 saw the transition of the global financial crises into a global economic recession, with falling demand hitting major exporters and European growth prospects forecast to favor the prime Western states. Against this backdrop, Invista Real Estate Investment Management ("Invista") expects risk adverse property markets such as Scandinavia, Germany and France set to lead performance over the short to medium term, according to its latest published research.
The report charts the historical correlation between real economic growth and real rental growth or leasing activity, pointing to those countries with substantial public spending programs, high household savings ratios and lower dependency on credit for private consumption and investment spending, displaying the greatest growth prospects and therefore the most resilient prime rental growth forecasts.
Across the eurozone, GDP growth of -1.5% in Q4 2008 (Eurostat) was by far the worst recorded quarterly performance since the inception of the euro, however the European Commission recently forecast that economic output in the eurozone, although well below-trend, would gradually begin to turn positive over the second half of 2009 to the end of 2010.
Furthermore, with a historical analysis of commercial property supply levels through previous cyclical downturns, Invista demonstrates the significant correlation between stock levels and the depth and duration of a rental decline. This will be particularly evidenced in the medium-term performance of the office markets, which retain restricted supply lines and should benefit from limited negative rental impact over the medium term.
Tim Francis, Head of Continental European Research at Invista, commented: "We believe that in contrast to the 1990's, the modest levels of supply in 2009-2010 could be an important factor in mitigating the scale of rental declines and severity of this property cycle. Negative economic growth will lead to rental declines across Europe over the next two years, but the downturn will be tempered by modest levels of pipeline supply. In the medium term, highly expansionary economic policies will give added impetus to the recovery in occupational demand, potentially driving above-average property portfolio performance."