European Fair Value Indext Q1 2016


Mark Unsworth

Associate Director

Phone +44 203 296 4221

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The full report

Key Highlights from the Report:

  • Cushman & Wakefield's European Fair Value Index™ was 56 in Q1, up from the Q4 published figure of 55 (Figure 1).
  • Just 37 of the 117 markets included in our index were classified as underpriced for Q1, with industrial continuing to be the most attractive sector.
  • Baltics and CEE regions have the highest share of underpriced markets and attractive opportunities for investors.
  • Of the larger markets, Paris industrial, Milan industrial and Dublin retail show as underpriced. On the basis of pricing alone, the five most attractive markets are all industrial: Brussels, Antwerp, Madrid, Riga and Barcelona.
  • Although bond yields fell across Europe this quarter, in several markets the impact on fair/required returns was more than offset by an increased illiquidity and property risk premium.
  • We believe the expansion of the Eurozone QE programme announced in March would be supportive of real estate investment and we expect yields to gradually move out only from 2018-19, dependent on the market.
  • On the occupier side, we expect moderate rental growth in the majority of markets supported by economic growth.
  • We expect the index to decrease in the short term as investor demand continues to push property yields lower and attractive investment opportunities diminish. The index should level off at around 45 by end 2017 and then recover.
  • The risks to the outlook include China hard landing, geopolitical tensions and potential for policy errors.