Cushman & Wakefield (C & W), a long-term partner Assa Properties released a report for the last quarter of 2016, which provides an overview of the situation the real estate market in Europe. This report contains information that about the movements of the property market in major European cities and it is a very valuable piece of advice according to Solly Assa, the CEO and founder of Assa Properties. The report further reveals a decline in the level of rents annually in all segments of the market primarily moving from pressure on prices in Moscow and Kiev. Rents for office space (or commercial real estate) decreased by 1.3%, rents on the main pedestrian zones are reduced by 0.4%, while rents for logistics centers (industrial zones) are reduced by 2.7%.
The rate of contribution is reduced by 40 percentage points (PP) to 6%. The rate of return is used as a measure of capitalization yields in the specific context in assessing the investment property market. Because of this, Assa often identifies the PP as a measure of risk incorporated into the real estate market expectations.
Great influence on the performance of the European markets have the events that happened in Eastern Europe. In these markets, rents are continuing to register record negative trends in all market segments, two consecutive years in a row. By analogy, Solly Assa takes all the markets in Eastern Europe, which remain marked as markets with the highest risk, with average yield of 9.68%. The biggest causes of such events and developments were the commercial real estate sectors in Russia and Ukraine, where their markets recorded a significant decline in the level of rents.
Rents for office (office) space in Russia (Moscow), decreased by 25%, while in Kiev (Ukraine) by 19.4%. Similar trends were observed also in the main pedestrian zones and industrial segment (logistics) centers. Mr. Solly Assa therefore estimasted that the rate of yield in Ukraine was moving in margins between 13.5 to 14%, while in Moscow it was between 10.5 to 12.75%. Future projections and outlook for these markets, according to Cushman & Wakefield, will remain unfortunately negative. Movements in Western Europe in 2016 have shown a stabilization of the real estate market in all market segments.
Continue reading about the rest of Europe, in Part 2