Â鶹ӳ»­

Property adviser DTZ sees tentative signs of a stabilisation in Europe’s commercial real estate investment market led by the UK. Transaction volumes in the UK remained flat in Q1 2009 at EUR 3.5bn compared to Q4 2008 while prime yields in some UK markets such as Central London stabilised over the quarter, the firm reported in its European Quarterly report published on Tuesday.

'These trends reflect the UK' s more advanced stage of correction and perhaps the depreciation of sterling which may have increased the attractiveness of the UK market for European investors,' the firm said. It added, however, that across Europe as a whole, the deterioration has continued as transaction volumes fell by over 30% to just EUR 11bn in Q1 2009. Across Europe’s largest and more established markets, activity over the quarter fell by 70% to EUR 0.8bn in France and by over 50% to EUR 1.7bn in Germany.

'In recent weeks we have begun to see improved functioning in the global credit markets, in part reflecting more positive signals from the real economy. This has been made evident by sharp rises in European equities in recent weeks, up by 34% from 9 March to 5 May, with real estate and bank equities up by 34% and 94% respectively. Whilst the European recession still has a long way to go, these may be early signs that the worst of the falls in economic activity are now behind us,' the report concluded.

Pricing continues to adjust at differing paces across Europe’s markets, DTZ said, adding that further outward shifts in yields can be expected over the course of the year. As the UK market’s rapid re-pricing appears to be drawing to a close, or at least slowing, demand is reported to be improving with investors increasingly discriminating in their assessment of opportunities, creating a two-tier market with a clear focus towards prime assets, let to strong covenants and with relatively long unexpired terms in a clear sign that investors remain averse to risk in the current uncertain market environment

With the availability of new credit lines expected to remain restricted, conditions in Europe’s real estate investment market are likely to prove difficult over the coming quarters with investment activity remaining at subdued levels, the report said. 'Activity will be focussed towards lower lot sizes as deals involving larger lots are likely to require joint ventures and more complex and lengthy negotiations.'

On a positive note, there remain a number of investors actively seeking opportunities in the market, including a range of institutional investors, opportunity funds and high net worth individuals, and although some German Open Ended Funds remain closed due to a freeze on redemptions, a majority remain open and continue to seek opportunities in core markets, with both Deka and Union Investment completing a number of significant deals in the last quarter.