Rising inflation is expected to have a negative impact on European retail property prices in the coming year, a new report has suggested. Property consultancy King Sturge has forecast that increases could lead to a weakening of occupier demand and prompt further tenant defaults.
According to the report, surging inflation could mean further volatility for commercial real estate investors next year, as retail property markets run the risk of a double dip in values, Reuters reports.
Indeed, King Sturge explained that the outlook for European retail property in 2011 was bleak, with retailers already facing margin pressures due to rising costs and now the prospect of lower consumer demand and inflation index-linked retail rents.
"The reality is retailers are likely to be very squeezed by substantial rent increases, which are not counterbalanced by higher sales volumes ... landlords are therefore likely to be facing declining levels of lease renewals and even some degree of tenant default," the news provider cited King Sturge as saying.