Marktbericht Europa April 2011

Investment volumes are set to reach historical averages in 2011 as the
amount of equity targeting European real estate has increased.

Executive Summary

• Investors’ focus on quality reflects an ongoing need for income security
  amid market uncertainty. The amount of equity targeting real estate
  creates a danger that pricing is getting ahead of fundamentals.
  
• Many investors are discouraged by the chase to buy prime office assets
  because pricing has become so aggressive. Best-quality retail was the
  preferred sector in the first quarter of 2011, as investors begin to price in a consumer recovery.
  
• Occupier markets are slowly improving due in large part to the continued
  lack of new development. Performance remains bifurcated between prime
  and secondary markets and northern and southern Europe.
  
• Uncertainty surrounds the future of bank lending. Banks are becoming
  increasingly strategic and wary of losing market share, especially since
  development finance is scarce. The market faces a significant funding gap
  as banks slowly reduce their exposure to commercial real estate.
  
• Regulatory reforms and macroeconomic events are adding downside risks
  to the outlook. Investors rank the specter of rising inflation and rising
  interest rates as the greatest threats to the commercial real estate
  recovery.