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European commercial property market performance 'is mildly encouraging'

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European commercial property market performance 'is mildly encouraging'

The performance of the commercial property market in Europe in the last few months has been hailed as "mildly encouraging".

According to Ed Stansfield, property economist at Capital Economics, it is good to see that the sector has largely held up throughout the financial crisis.

Indeed, he noted that outside the smaller markets and peripheral economies, there have not been significant slumps in rental values in recent times.

However, Mr Stansfield acknowledged that it is still "fairly early days", which means circumstances could change at some point in the future.

Furthermore, he said the impact of ongoing financial problems in Europe may take some time to become apparent in the commercial property market.

This, he stated, is because it typically tends to respond to developments in the wider economy with "something of a lag".

As a result, Mr Stansfield believes it is too early to say the commercial property market has survived the crisis and that it will not experience a downturn in the coming months.

"There are still risks," he observed.

"As things continue to get worse, as the recession deepens and a lot of forward looking indicators for Europe show that activity is continuing to slow through the third quarter, [it is likely that] we have yet to see the full extent of the downward pressure on rents."

This means it could be difficult to predict whether international money transfer activity among commercial property investors will hold up between now and the end of the year.

Nevertheless, Mr Stansfield did flag up a number of locations where the market is likely to perform relatively well in the next few months.

The UK and Switzerland, for instance, were both flagged up as possible options for investors, since they are not part of the eurozone. As a result, they will not be affected as badly by a country pulling out of the financial bloc as member states.

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