European Forecast & Fair Value Report Q2 2020

Riccardo Pizzuti • 12/08/2020

The all-sector European Fair Value Index score was 61 in Q2, up from the Q2 figure of 41. Commercial real estate valuations generally improved on a relative adjusted basis as an increasing number of prime market yields in Q2 started to move upwards (reducing the future negative impact from outward yield shift), with the majority from the retail sector.

Economic Overview

Over the last 3 months the economic outlook has continued to deteriorate. The contraction expected for 2020 has deepened and the recovery for 2021 has reduced. Oxford Economics baseline scenario now expects the Eurozone to recover to pre-crisis levels by mid-2022, a year later than was forecast 3 months ago. If a second peak in infections does occur then the recovery is delayed to 2025. Equally though, should there be a breakthrough in the vaccine then recovery could be as soon as the second half of next year. These scenarios illustrate the great uncertainty that comes with any economic forecast at the moment.

Occupier Overview

With only modest economic growth forecast and positive but slower growth in employment, limited rises are forecast for commercial property rents across much of Europe. 

As such, European all sector* prime rents are forecast to increase by around 0.3% p.a. over the next five years with logistics showing faster growth than office and retail under performing.

Capital Markets Overview

The lockdown period caused quarterly transaction activity in Europe’s commercial property market to drop to its lowest since 2014. However, now that most of the continent’s confinement rules are easing, assuming that there are no major outbreaks and no more lockdowns, momentum should pick up in the second half of the year. 

Government bonds were mostly stable over the quarter, with the exception of countries that were more sensitive to risk sentiment, where bond yields declined. The most notable development was a decline in the Italian 5 year bond yield of 36 basis points to 0.5%, benefitting from hopes of moves towards more coordinated support measures in the Eurozone. 

*123 European markets: 49 office, 41 high street retail and 33 logistics


About the European Fair Value Index

The index was launched in August 2010 and covers 123 markets across Europe. 

Fair value is the value at which an investor is indifferent between a risk free return and the forecast return from holding property, taking into account the extra risk of investing in the property asset class.

When a property price is at fair value, an investor is being adequately compensated for the risk taken in choosing to purchase real estate; similarly, when the property price is below the fair value price, an investor is being more than compensated for the risk taken in choosing to purchase real estate. When buying at or below fair value, an investor does not necessarily buy at the bottom of the market.

Our fair value analysis focuses on prime assets and a five-year investment horizon, and hold for the market overall; individual transactions may provide opportunities and risks beyond the average market view. In the report, we compare results for the current quarter with the previous quarter, which may differ from those published in the previous quarter’s report; this is due to the forward-looking methodology. As such, when our forecasts change so too does the Fair Value Index.


What's Next for Women at Cushman & Wakefield
Article • Our Community

What’s Next for Women at Cushman & Wakefield

At Cushman & Wakefield, we strongly believe that diversity better positions us and our clients for what’s next.

Janice O'Neill • 13/06/2019
Dallas 5 Fast Facts Industrial
Article • Industrial

DALLAS - 5 Fast Facts: Industrial Q4 2019

Read our 5 Fast Facts to learn more about the key trends driving the industrial segment throughout the Metroplex.
Ching-Ting Wang • 24/02/2020
Operation Backpack
Article • Our Community

NEW YORK - In the Community

Cushman & Wakefield employees were excited to give back to the community at two recent New York events: Operation Backpack and its fourth annual Markman Madness Tournament.


Commonwealth Bank of Australia • Banking & Finance services
Learn More
Trancom • Transportation
Learn More


Looking for more historic or specific property market data? Get in touch.