Uptick Forecast for European Commercial Property

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European commercial property is expected to deliver an 8 percent annual return for the next five years, according to new research from consultancy DTZ. 

The industrial sector is forecast to deliver the highest return from 2013 to 2017 at 9 percent annually, followed by retail at 8 percent and the office sector with 7.5 percent annual return during the same period, DTZ said in its second quarter European Property Forecasts.

Market selection can increase return prospects for investors, the consultancy says.

"We expect the Central and Eastern European markets and Dublin to deliver higher returns compared to core markets," Fergus Hicks, global head of forecasting, said in the report. "This mainly reflects the fact that yields are currently higher in these markets."

In particular, Dublin is expected to show an average 15 percent annual return across all sectors as it benefits from the economy recovery and "some yield compression." 

As economies recover across the continent, commercial property rents in Europe are expected to demonstrate slow growth of 2.5 percent in the next five years, led by the retail sector at three percent, followed by office at two percent and industrial at 1.5 percent. 

Last month, CBRE reported a 13 percent annual increase in European commercial real estate investment, while Cushman & Wakefield released data showing a five-year high for European commercial property deals.