We are pleased to share with you the CBRE European Real Estate Market Outlook for 2017.
Political events are bound to be big news items in Europe in 2017, as they were in 2016. Beyond the political and economic headlines property markets will react in different ways to new challenges. In this report we offer our views on what trends and forces will shape European property markets in 2017. At the macro level these include the prospects for economic growth, rising inflation and higher interest rates. We also look at how technology and changing tastes can have major implications for occupier demand.
Expect a year of political uncertainty and the challenge of rising interest rates in Europe in 2017.
Although, all of the talk is now of the growing momentum of populist politics we do not foresee any surprises in the Dutch, French or German General Elections in 2017, although there may well be bouts of political uncertainty and market volatility in the run up to major elections.
Politics aside, however, the gradual tightening of some occupier markets seen in 2016 will continue in 2017, especially for better properties in the better locations.
The UK will be an exception. Even though the UK economy will continue to grow at least as fast as other large European economies.
Prospects for retail will continue to be heavily polarised with prime high streets at one end of the spectrum and secondary centres at the other.
Rental growth prospects for industrial and logistics property will also divide; dependent on the ease of increasing supply to meet increasing demand.
Despite a gradual turnaround in the long-term interest rate trend, there is still scope for further yield compression in prime assets as rental growth and low interest rates by historical standards continues to make property look attractive. 2018 or 2019, rather than 2017 are likely to be the years when the yield cycle starts to turn.
Watch out for changes in tastes and technological change that alter the patterns of occupier demand.
The European Outlook is one of a series of Outlook Reports being produced by CBRE. The UK Outlook is already available and the Global Outlook will be available in early February. Other regional and country outlooks will also be released over the following month.