Our forecasts envisage that European commercial property markets outside of the single currency region will benefit from the recent lull in the euro-crisis. Although the fundamental economic drivers of property have not improved materially since our previous Analyst, improved sentiment would tend to boost risk appetite, meaning that occupier market weaknesses may place less upwards pressure on property yields. But our view is that property yields are more likely to drift higher than lower. Together with our forecasts for rents to do no better than stagnate this year, small falls in capital values seem likely. By region, we think that Emerging European property markets will typically experience a shorter, shallower downturn in values. They may begin to recover as early as next year, as rental value growth turns positive. But property values in the West may remain depressed until 2015 or later.
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