European Capital Markets
The further yield movements in Q1 are reflective of general investor sentiment, ith weakening economic outlook and expectations of rental declines being more aggressively priced in. Following the very rapid yield movements in the past two quarters, prime yields in some European markets, such as London, Madrid and Paris are starting to look attractive.
Over the course of Q1 2009 the outlook for the European economy continued to weaken, and GDP in all but one of the EU-27 economies is now expected to contract in 2009. The exception is Poland, with stagnant growth forecast of 0.1%. Over the last few months some of Europe’s largest economies, such as Germany, France,
Italy and Spain, saw even more marked declines in GDP and Industrial Production than was previously expected, with further downward revisions likely across all countries.
In Q1 2009 European investment activity fell for the seventh consecutive quarter to €11.3 billion, a 45% decline
on Q4 2008. However, such a low level of activity is perhaps not surprising, given the general uncertainty surrounding the outlook for both the economy and capital markets. The fall in investment turnover was evident across Europe, with only a few of the smaller marets reporting an increase in activity over Q4 2008, often
influenced by a single large transaction.
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