European industrial property market

In the office sector rental growth is seen in most markets as vacancy rates have fallen further. London, Madrid, Oslo, Paris and Warsaw have had robust growth of prime rents. However, central London rental growth has experienced the most immediate impact of the credit crunch with major financial sector employers believed to be holding off on any decisions to take space, repressing further rent inflation. Rental growth in the central business districts in Frankfurt, Helsinki and Stockholm have accelerated over the year, as supply of good quality space is increasingly becoming limited. In Amsterdam and Prague rents have been growing at a more modest pace.

Looking forward, rents are expected to continue to show strong growth in Paris, Frankfurt and Stockholm. Growth in Madrid and London is expected to tail off as new large development schemes are due to complete next year. Helsinki and Warsaw also have a significant pipeline. This could dampen rental growth prospects in the medium term. Amsterdam and Germany's major office cities are expected to deliver strong returns over the next 3 years. These cities are in their early stages of recovery and most rental growth is still to come.