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European Commercial Property Capital Values Fall

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European Commercial Property Capital Values Fall

By - Wednesday 08 August 2012

The value of commercial real estate assets in Europe has fallen by 0.9 per cent overall in the second quarter of this year, compared to the first three months of 2012. This is the finding of new research published by CBRE, which revealed the decline has been steepest for industrial property, which dropped in value by 1.3 per cent in this period, while retail assets have held up best, sliding by 0.7 per cent.

On an annual basis, the cost of buying commercial real estate was down by 2.1 per cent. Andrew Barber, senior director of valuation advisory at the firm, commented: "This relatively flat performance masks a deepening polarisation not only between individual markets, but also between prime and secondary assets for which the yield gap is widening." He predicted the rate at which banks are disposing of their property holdings will increase over the coming months, which should help improve transparency when it comes to pricing.

In its Pan-European Quarterly Property Fund Index for the first quarter of 2012, IPD noted returns for real estate investment funds hit their lowest level for two years. The eurozone crisis and slowdown of economic growth were both cited as factors that contributed to the decline, while Spain and Italy were singled out as the poorest-performing markets. The CBRE data also highlighted the weakness of the markets in southern Europe and Ireland, where capital values have declined by ten per cent year-on-year.

Mr Barber went on to predict it will be a mixed picture for European real estate markets over the coming 12 months, stating: "We anticipate values will remain stable for assets in core countries, and to continue to fall back for those that do not meet these criteria, where the lack of available financing particularly places ongoing pressures on the market." Germany was the only location where CBRE did not record a fall in capital values, while the Nordic countries and France were cited as other destinations that held up relatively well, posting a drop in prices of 0.1 per cent and 0.3 per cent respectively.

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