2019: European markets at a plateau
· European real estate enters 2019 with some of the strongest fundamentals ever seen in the market. Investment volume reached €264bn in 2018, stable on 2017.
· There is increasingly less room for yield reduction and hence capital growth will be much more isolated and hard to find. Office yields are expected to remain stable in 2019, but further compression is expected in prime yields for Logistics.
· We remain optimistic about real estate performance, acknowledging that the market is in the late stage of the cycle; but the turning point is not yet here.
· We expect single digit returns for all asset classes in 2019; average prime total return in offices (+4.0%), Logistics (+7.5%) and Retail (+3.5%). The best results will be found in property that is able to generate superior income returns with minimal fall in capital value.