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Deka forecast: Crisis to hit European markets - Germany relatively stable!

December 08, 2011

Next year is when the financial and economic crisis will come to the European commercial real estate markets. The latest release of "Deka Immobilien Monitor" predicts weaker tenant demand, rising net initial returns and tougher financing conditions. But Germany is to remain a relative island of stability: while significant rent reductions threaten in the office markets of southern Europe, Deka's chief economist, Ulrich Kater, said he expects a stagnant office rental market in Germany in 2012 and mild increases of around 2.5% for each of the years from 2013-16. "The robust job market and the low volume of new construction in most markets are stabilizing the office market in Germany," said Matthias Danne, Chief Financial Officer of DekaBank. For Europe's investment markets, Deka's experts said they expect climbing net initial rate of return again starting in 2012. In the core countries of northern Europe such as Germany and France, increasing net initial rate of return amounting to an average of 20 basis points in 2012 and 30 basis points in 2013 are expected. On the southern periphery of the euro area, net initial rates of return are predicted to be around 60 to 80 basis points above the long-term average from 2001-10.

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