The appeal of European real estate rose could fall later this year as yields decline, according to research by DTZ.
The advisory firm鈥檚 European Fair Value Index report foresees more investment in central and eastern European markets than in western Europe.
DTZ researchers expect the attractiveness of European property to weaken from the second half of this year as property yields decline.
The firm said Moscow鈥檚 office and retail sectors, as well as Geneva and Zurich鈥檚 office sectors were at the bottom of its latest rankings, reflecting heightened investor risk aversion towards Russia and very low property yields in Switzerland.
DTZ鈥檚 latest index 鈥� for the final quarter of last year 鈥� rose to an overall rating of 79, from the previous quarter鈥檚 figure of 76.
The increase marks an improvement in the appeal of European commercial property. The European Central Bank鈥檚 recently announced 鈧�1.1trn quantitative easing programme is increasing the attractiveness of European property when compared with bonds, DTZ said.
Fergus Hicks, DTZ鈥檚 head of global forecasting, said the fall in bond yields and forward rates that the ECB鈥檚 QE programme has triggered, makes European property attractive and 鈥済ood value in the first half of 2015鈥�.
Madrid鈥檚 industrial sector is the most attractively priced market in Europe this quarter, DTZ found, alongside other industrial markets in Spain, the CEE region and peripheral countries which look 鈥渦nderpriced鈥�.
The industrial sector is currently the most attractively priced sector in Europe, with the top five most underpriced markets in DTZ鈥檚 index all coming from the sector.
Spain tops the list for commercial value, with Madrid and Barcelona鈥檚 industrial and office markets ranked in the top 10 list of most attractively priced markets in Europe. Spanish property markets are set to benefit from an economic recovery, improved occupier sentiment with positive rental growth prospects and more attractive pricing than many western European property markets.
Magali Marton, DTZ鈥檚 head of research for EMEA, said the 鈥漷raditional core markets鈥� of France, the UK and Germany look 鈥渇ully priced now鈥�.
鈥漈o find attractive investment opportunities, investors need to look to southern Europe, the CEE and Baltic markets, where yields remain higher and economies are recovering,鈥� she said.
