Euro-zone

Ireland

Sector fortunes to shift

While the Delta variant has slowed economic activity in other parts of the world, this has not yet been the case in the euro-zone, and we are cautiously optimistic that the bloc will continue to grow. This will support the property market upturn, albeit offices and retail face structural challenges that will limit the rental recovery. Stronger rental prospects for industrial mean we think that the sector has the most scope for yield compression in the near term, though strong demand for prime assets should allow office yields to edge a bit lower too. However, further increases in yields will make some retail assets look increasingly attractive by year-end, prompting small yield falls in the next few years. The upshot is that industrial is expected to outperform over the next couple of years, but stronger capital value growth beyond 2022 will result in retail returns emerging as the strongest.

16 September 2021

Inflation to rise further, but then fall

Inflation will rise further from the 3% level reached in August in the coming months, but we are confident that it will drop back sharply next year, as most measures of underlying inflation and wage pressures remain very low. Meanwhile, all eyes will be on the ECB Governing Council meeting next Thursday, when we expect policymakers to announce the start of a very gradual reduction in the Bank’s asset purchases.

3 September 2021

Tentative signs of a turning point for property

All-property capital values rose for the third consecutive quarter in Q2, leaving them less than 1% below their pre-virus level. The improvement was driven by a decline in all-property yields, though rents also rose slightly on a quarterly basis for the first time since Q1 2020. The outlook is encouraging for occupier demand and investment in the coming quarters given economic activity is expected to rebound strongly. However, depressed tourist spending and online shopping will drag on the retail recovery. And higher vacancy and more remote working will limit the improvement in the office sector.

18 August 2021
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A primer on European residential property

Less favourable demand fundamentals and less scope for yield compression mean that European residential returns are likely to be lower in the coming years than over the previous decade. An analysis of the relative outlook across selected western European markets suggests that the Netherlands and the UK offer the best prospects.

In view of the wider interest, we are sending this European Commercial Property Focus to clients of our UK Commercial Property service.

Strong rebound and temporary rise in inflation

The euro-zone is on the way to an almost full recovery. We expect Germany to regain its pre-pandemic level of activity later this year and the tourist-dependent southern countries to do so next year. The Delta variant may lead to some voluntary social distancing or self-isolating and perhaps limited restrictions over the winter, but we doubt that it will derail the recovery. Inflation will rise further than most expect in the coming months due to rising input costs and supply bottlenecks. But with wage agreements and inflation expectations remaining low, it will drop back and stay lower than most expect over the medium term. The ECB is likely to step up its standard Asset Purchase Programme substantially when its emergency purchases end next March and leave its deposit rate at -0.5% until beyond 2025, which is much later than investors expect.

No stopping Dublin industrial rental growth

A healthy economic backdrop, favourable supply conditions and the potential for a post-Brexit boost mean that we forecast Dublin industrial rents to keep growing at around 2% p.a. over the coming years.

28 January 2021

A primer on Irish reunification

The recent election result in Ireland has made the prospect of reunification slightly less remote. In this Update, we answer four political questions and four economic questions about what it might mean.

17 February 2020

Any boost to Dublin industrial rents will be temporary

Indicators suggest that Irish industrial rental growth will remain healthy in Q1. However, as economic growth slows and uncertainty about the UK’s future relationship with the EU continues to impact decision making, we expect that industrial rental value growth will soften over the year.

13 February 2020
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