Recent declining confidence in Europe’s commercial real estate extended to all but the already weak office sector, with a downturn in both investment and rental sentiment. But underlying economic factors remain sound and a more subdued mood may be an improvement over volatility and unsustainable surges. See the following article from Property Wire for more on this.
Sentiment in the commercial real estate industry in Europe is cooling off slightly despite the upward trend of the German economy as a whole, a new report suggests.
The December King Sturge Real Estate Economy Index dropped by 1.6%, down to 134.8 index points, making it the second month in a row that returned a lower score.
‘The downturn is a little more pronounced this time than it was the month before, but the level remains high then as now,’ said Sascha Hettrich, managing partner of King Sturge Deutschland.
‘In December the leveling out of the seeming euphoria of recent months is explained primarily by the decline in investment sentiment,’ he added.
Indeed, the investment climate dropped by 2.1%, from 143.2 down to 140.2 index points. Unlike last month’s survey, December also saw a first downturn for rental income. This second sub-indicator of the Real Estate Climate reflects the expectations of the more than 1,200 polled market experts in regard to user demand and corresponding rent rate development. The Rental Income cooled off by 0.9%, from 130.6 down to 129.4 points.
The majority of segments showed a slight deterioration of sentiment. The Retail Climate returned the steepest losses, down 3.6%, dropping from 140.4 down to 135.4 index points. The Residential Climate declined by 2.8% to 159.9 points (down from 164.5 points the previous month), the Industrial Climate by 0.2% to 129.4 points (down from 129.6 points). This one segment that received an improved month-on-month score from the polled market experts was office. That said, the Office Climate, now standing at 124.2 index points (up from 123.6 last month), keeps showing the lowest index score among the segments.
‘Despite the flagging euphoria in the real estate industry and the fickle international markets, the ‘hard’ macroeconomic facts keep rallying,’ said Hettrich. The Real Estate Economic Situation index, based on the statistical analysis of ifo Business Climate, DAX, Dimax, and interest rates, grew by 0.6% in December, achieving a score of 205.9 index points (204.6 the month before).
‘At the moment, certain signs suggest that the sentiment is leveling out, which is an unavoidable and at times even sensible thing to do. After all, the Real Estate Climate climbed from one peak to the next between July and October 2010. An unchecked continuation of this surge would be less than sound. And even in December, the level of the Real Estate Climate has topped the level of January 2008,’ explained Hettrich.
‘Moreover, the majority of market players have continued to award positive ratings to the Real Estate Climate with its sub-components Investment Climate and Rental Income, as well as to all the segment climates. To be able to say with any degree of certainty whether this does indeed mark the turnaround, we will have to wait and see what the coming months might bring,’ he added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.