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Despite slowdown the investment markets remain at high levels

The resilience of the UK economy is striking, with a 0.5% quarterly growth in Q3, although BNP Paribas economists were not expecting a rapid transmission of the Brexit effect into activity data. It will be another month before details of the components of demand are published, but it seems most likely that growth was driven by consumption and exports. For the former, a reversal is to be expected. The significant depreciation of sterling is already having a marked effect on inflation, which will inevitably impact consumer purchasing power. Exports will benefit from the weaker pound but should not have a strong impact on economic activity. In the Euro zone, the expected deceleration of growth is now taking clearer shape. The quarter -on-quarter figures show respectable growth, particularly in Spain (0.7%), but suffer from fading supports (the depreciation of the euro and falling energy prices).

The total commercial real estate investment volume in Europe reached € 151bn between Q1 and Q3 2016, a 15% drop compared to the same period in 2015. With € 53.5bn over the 9 first months, the 14 Western European markets monitored in this report posted a 13% drop compared to Q1-Q3 2015. Investment volumes may have slowed down over the last nine months but they remain 32% above the 10-year average that stands at € 40.5bn.

Central London remains 4% up on long-term average; it reached back the levels in 2012 with € 14.1bn invested over 9 months. After a buoyant Q2, Central Paris continued at the same pace with € 6.2bn invested during Q3 2016. Berlin dropped 21% compared to Q1-Q3 2015 during which a new historic high was recorded. Likewise, Madrid and Milan investment volume posted a yearly drop but achieved a new high during the first nine months of 2015. Amsterdam, Brussels, Lisbon and Vienna are the only investment markets to have grown over a year. While Dublin, after an extraordinary catch-up in Q2 mainly due to the Blanchardstown retail transaction, recorded a very passive Q3.

Key interest rates posted new records in 2016. German 10-year bund already turned negative in Q3 (-0.19%). This, combined with high volume of liquidity tightened prime yields further. For offices, prime yields stood at 4.03 % in Q3 2016 on average among the 14 markets monitored 40 bp down on Q3 2015.

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