Continental carry trade

The big takeaway from the interim results season is the recovery in continental property markets. It’s been a decade since the listed sector in Europe signalled such a positive outlook in spite of some mixed performances in retail. Offices and logistics/industrial in all countries, and residential in almost all, would appear strong or in recovering phase, and with limited new supply. Combined with low interest rates and strong investment markets, this trend is partly reflected in share price performances, with the EPRA/NAREIT Index for the Eurozone showing an 8% TR in euros YTD, or 15% in sterling.

Colonial in Spain takes the prize as the most positive, particularly on the Barcelona office market, but perhaps the biggest change in sentiment this year is in Paris offices where Gecina, Icade, Unibail and Colonial are signalled good momentum. And it would appear the ‘Macron effect’ has been positive for the regional market with Foncierre des Regions and Icade both reporting improved take-up and rental growth in the larger cities. Meanwhile the Nordic markets continue to show good growth and limited supply, as reported by Entra, Wihlborg and Fabege; and the German office markets outlook remains positive (Alstria). Supply is coming through in Dublin, and Paris has the potential for higher supply, but at the moment Europe is not showing the same supply-side threats as we are seeing in the US (a key feature of the US REIT reporting season). Even the Dutch office market feels better!