Over the first half of the year, capital values in the Emerging European commercial property markets were little changed, while values in non-euro-zone Western markets edged a little higher. Over the next 18 months or so, we expect the outperformance of Western markets to be sustained as rents continue to inch up and yields inch down while, by contrast, Emerging European markets mark time. In the later stages of the forecast horizon, however, those patterns should be reversed, as the comparatively high starting point for Emerging European property yields attracts higher levels of investor interest and affords capital values in those markets some protection from an assumed normalisation in interest rates and bond yields.
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