The market environment
The acceleration of the integration process in Europe – as demonstrated by the drive toward expansion by the EU and the introduction of a common currency – has initiated a phase of far-reaching changes on the European property markets. Improved comparability has made sector and geographical differences even easier to identify.
A pioneering mood continues to prevail on the markets of Central and Eastern Europe, and the current state of affairs is comparable with the atmosphere in Western Europe after the end of the Second World War. The general economic indicators for Central and Eastern Europe, and especially the new EU member states, exceed the comparable figures for Western Europe, and the demand for properties – both on the rental and investments markets – is high. Growing strength in recent years has brought a number of submarkets up to West European levels, also with respect to returns. The east-west differential seems to have disappeared, and analyses now focus on the extent of development in the individual regions. The year 2005 was generally characterised by rising rental activity on the office markets in Central and Eastern Europe. However, the construction of new space has not increased and, as a result, the overall vacancy rate has declined. Rental prices remain stable (both average and for top rents) but acquisition costs are rising, and this has placed a cap on top prices.
The individual property submarkets in Western Europe mirror the differences in the regional economies, and have therefore shown very diverse patterns of growth in recent years. Above all in Germany, economic weakness was accompanied by a massive slump on the property market, which created numerous attractive acquisition opportunities for investors. However, the first signs of recovery appear to have eased the tense situation in this country, and both rental activity and rental prices have started to improve.
A pioneering mood continues to prevail on the markets of Central and Eastern Europe, and the current state of affairs is comparable with the atmosphere in Western Europe after the end of the Second World War. The general economic indicators for Central and Eastern Europe, and especially the new EU member states, exceed the comparable figures for Western Europe, and the demand for properties – both on the rental and investments markets – is high. Growing strength in recent years has brought a number of submarkets up to West European levels, also with respect to returns. The east-west differential seems to have disappeared, and analyses now focus on the extent of development in the individual regions. The year 2005 was generally characterised by rising rental activity on the office markets in Central and Eastern Europe. However, the construction of new space has not increased and, as a result, the overall vacancy rate has declined. Rental prices remain stable (both average and for top rents) but acquisition costs are rising, and this has placed a cap on top prices.
The individual property submarkets in Western Europe mirror the differences in the regional economies, and have therefore shown very diverse patterns of growth in recent years. Above all in Germany, economic weakness was accompanied by a massive slump on the property market, which created numerous attractive acquisition opportunities for investors. However, the first signs of recovery appear to have eased the tense situation in this country, and both rental activity and rental prices have started to improve.
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