Investment in European property is expected to fall by quarter in 2008, says Jones Lang LaSalle.
In its European Capital Markets Bulletin 2007, released this morning, JLL said that ‘clarity over pricing’ and ‘confidence to return to the market’ should happen later this year, but that it was too late to prevent a 25% drop in transaction volumes from 2007’s figure of E244.1bn (£184bn).
Nigel Roberts, chairman of European research at Jones Lang LaSalle said: ‘By the second half of 2008 if occupational markets do not disappoint we look forward to improving confidence and a return to an activity traded market at prices more in line with long term trends.’
He said: ‘We anticipate limited rental growth and negative gross returns across Europe as a whole in 2008. Both performance metrics are significantly below the last five years, but can be seen as a bottom turning point in the market. Our forecasts point to 2008 being the low point in the return cycle across Europe.’
According to the report, the €244.1bn (£184bn) spent in Europe last year represented a fall of 4% lower than 2006. The UK was the worst affected, suffering a 22% drop to €71bn (£53bn) for the year.
Tony Horrell, CEO of European capital markets at Jones Lang Lasalle said: ‘At the start of 2007, we were questioning whether some of Europe’s more mature markets (the UK especially) had reached their natural yield floor, as financing costs increased in line with interest rate rises. At that time very few people could have predicted the credit crunch and the severity of the tightening of real estate credit markets that followed.’
‘The increased cost and lower availability of credit defined the top of the market cycle. Despite this, some countries such as Belgium, France, Germany and Spain, still saw record volumes in 2007.’