Normal speculative development patterns are a long way off – Jones Lang LaSalle
Jones Lang LaSalle does not expect normal patterns of speculative development completions to return to the European commercial property markets for the next five years.
It notes in new research that the vast majority of new equity players and sources of debt finance will all be focusing on the same kind of prime office space and lower-risk lending in the most liquid European markets – London, Paris and some of the major German and Nordic cities. Many core European markets will be starved of good-quality office space, the firm says, and the polarisation between grades of stock will increase.
Bill Page, director of EMEA research at JLL, says this sustained competition for the same type of property means that the strongest returns could lie outside the most liquid European markets. “Secondary space might also present more opportunities for cash-rich, entrepreneurial investors who have a long-term view and are willing to ride out the economic risks across Europe,” he adds.
In addition, he says pre-let deals will increase in appeal to debt funds – they will be the only way for some developers to get a scheme up and running, he notes. “The flip side is pre-lets will cost more for tenants who are paying to offset the developer’s risks,” he adds.
