The recovery of the real estate sector in most European markets gain ground with Ireland, Spain and Portugal all seeing more favorable trends in both occupier and investment markets, according to the RICS Global Commercial Property Monitor for the fourth-quarter (Q4) of 2014.
In Europe, results are somewhat mixed. Indicators are that commercial property in Spain, Portugal, Germany and the UK is expected to record solid capital value and rental growth over the next year. In fact, Portugal and Spain registered the sharpest rate of increase in investor demand during Q4. This signals a strong rebound after the harsh impact of the 2008 global financial crisis in both cases.
In France and Italy, however, the occupier markets remain poor, as weak tenant demand is coupled with rising availability of space. Unemployment rates have actually inched up over the past year in both countries and this goes someway to explaining the poor sentiment. The expectation is that near term rents will remain in decline. However, the investment markets are showing some early signs of improvement, with investment enquiries rising substantially in France, and at a more moderate rate in Italy.
In Poland, the economy has so far been resilient in the face of the Russian-Ukrainian crisis, but this is not fully reflected in property market sentiment. The RICS monitor shows that occupier sentiment was relatively unchanged over quarter and remains in negative territory, although investment sentiment moved further into positive territory, albeit not dramatically. Where the mood is positive, this tends to be concentrated at the prime end of the market, in particular retail; the outlook for secondary property is rather more downbeat.
A raft of economic pressures in Russia seems to have impacted on confidence there. 54% of respondents expressed the view that the depreciation of the Rouble was a threat to business (31% stated it was too early to tell). Furthermore, the Russian central bank raised interest rates to 17% in December last year, the economy is now contracting, and the huge fall in oil prices is likely to further exacerbate the economic turmoil. Together, these impediments present a challenging set of circumstances for Russia’s commercial property sector, with little respite anticipated in the foreseeable future.