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IPD Europe 2010 Results

According to Dermot Charleson, Head of Jones Lang LaSalle’s European Valuation Advisory team



According to Jones Lang LaSalle’s European Valuation Advisory team, total investment returns published by IPD for 2010 were up on 2009 for all European commercial real estate markets, demonstrating the impact of improving investor demand and liquidity in the sector.  Many country property investment markets have been languishing in negative returns territory since 2008, however, the results show a significant turning point in 2010 with all markets except Ireland shifting to positive numbers.
 
Not surprisingly, the UK led the charge in 2010 with a 15.1% total return followed by Sweden and France showing a robust recovery to 10.4% and 10.0% respectively. France, Netherlands, Spain and CEE all turned positive in 2010 having shown negative returns in 2009. Ireland is the only market to show a negative return in 2010 (- 2.4 %) as it fights its way through the recovery although this is still a positive leap from 23.3% the previous year.
 
Improving total returns were bolstered by capital growth, fuelled by strengthening investor demand in most markets, notably in the UK (+8.3 %), France (+ 4.00%)  and Sweden (+5.00 %), However, weak underlying occupier markets across Europe meant that any rental growth had minimal impact on returns with most of this capital growth being driven by yield compression.
 
Germany registered negative capital growth of -0.9 % in 2010. This is a disappointing number compared to other markets, given that Germany has been the powerhouse of the recent relative recovery in continental Europe. However, this is more likely to be the result of the domestic approach to real estate valuation which favours a 'smoothing' of values rather than a 'mark to market' approach, which captures fully the market highs and lows.   
 
Dermot Charleson, Head of Jones Lang LaSalle’s European Valuation Advisory team, said: “Valuers contributing to IPD across Europe had a very difficult job throughout 2008 and 2009 as stagnant markets with few sales transactions meant there was limited evidence available to justify valuations. However, a recovery in transaction activity in 2010, with total investment volumes up by nearly 50% at €104bn, created significantly more benchmarks to underpin values. To some extent the mist has lifted for valuers across Europe, but with most investment trading still occurring at the prime end of the market there is still a lack of evidence and greater uncertainty around secondary values.”