European prime commercial property is predicted to deliver total returns of 17.5%, the highest for nearly a decade.
According to new research from DTZ, the figure will average at 6.6% over the next five years.
Despite uncertainty around Greece’s future in the Euro, real estate remains attractive when compared to other fixed-income assets.
DTZ predicts the industrial commercial property sector will be the best performing, with returns of 8.2% pa forecast over the next five years, followed by retail (6.4% pa) and offices (6% pa).
Capital values are also expected to rise at a pace of 1.7% pa until the end of 2019.
DTZ global head of forecasting Fergus Hicks said: “Despite the prolonged evolution of the Greek crisis, overall we are seeing very strong investment demand for commercial property. This is keeping downward pressure on commercial property yields and we have revised our European yield forecasts lower as a result.”
EMEA research head Magali Marton said: “We expect commercial property rents across Europe to rise 4% this year and 3% next year, marking modest uplifts on the back of firmer economies.
“We have seen occupier demand pick up in many markets, while there is a shortage of high-quality buildings, which are combining to put upward pressure on rents. Overall, we think retail has the best rental growth prospects over the next five years.”
