Marktbericht Europa Apr10

Investor sentiment in the private markets continues to improve, despite weak economic data.

Executive Summary

• Economic growth is set to improve in the second quarter following a raft of weak economic data. But risks abound, including Greece’s ongoing debt refinancing saga. Central banks remain committed to offering easy monetary policy for some time.
  
• The manner in which banks will manage down their estimated €1 trillion loan book is a key to the direction of the commercial real estate market. Banks have offered little clarity to date, which means a long and drawn out solution remains likely.
  
• Overall sentiment has improved, but most investors and banks remain focused on prime real estate in core markets. Nonetheless, there are signs that investors are starting to look further afield than major prime markets.
  
• Performance in the listed sector has been lackluster, in part because equity investors remain underweight in real estate. Growing demand for debt enables listed firms to issue bonds at relatively attractive prices, which makes it possible to complete deals that are accretive to earnings.
  
• Occupiers in all sectors remain under pressure to reduce rents in light of the weak economy, although the pace of rental decline is easing. The retail sector in particular is facing a difficult year, due to weak consumer credit conditions and rising unemployment.