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German real estate market still in shape, but for how long?

Q2 results of the RICS Global Property Survey show Germany and Russia as the top European performers, but sees expectations for Germany improving at a more modest pace in comparison to previous quarters. Indeed, the crisis in the eurozone is now raising concerns as to whether the German economy and its real estate market can continue to buck the more gloomy picture pervading much of the rest of Europe.

Significantly, the survey indicates that signs of stress are spreading from the periphery to other markets. Greece, Spain, Ireland, Portugal, France and Italy in particular showed signs of distress during this quarter of the year, with both sentiment and activity levels suffering on the back of elevated uncertainty.

Russia and France saw available space continue to rise; however, whilst in Russia occupier demand continued to increase, albeit at a slower pace, in France occupier demand declined.

Poland’s absence from the top of the rankings is notable and comes on the back of sub-par economic growth performance. Available space continues to increase which is contributing to a slightly softer rental picture.

Developments in Europe’s investment market also took a slight turn for the worse, with only six countries recording increases in investment demand and only Germany reporting positive capital value expectations compared to four previously. The investment market in Poland, influenced by the weakness of its zloty, lost momentum with enquiries and capital value expectations easing a little following a couple of years of strong gains.

With respondents acting more cautiously in both the occupier and investment markets, expectations for the eurozone are even gloomier for Q3.

In the rest of the world, following on from strong Q1 results, the commercial real estate market in North America and Canada has maintained its more positive mood in both occupier and investor markets despite the global economic slowdown. China and Hong Kong also appear to have relatively resilient occupier markets for the time being.

Commenting on the survey results, Simon Rubinsohn, RICS Chief Economist, said:

“The re-emergence of the euro crisis allied to generally weaker economic numbers has clearly taken its toll on much of the real estate world. It remains to be seen whether they can continue to buck the more gloomy trend if the macro data remains disappointing. Recent actions from central banks in Europe provide some reason for encouragement but more stimulus may be needed to ensure the global economy can steer a path through the increasingly choppy waters.”

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