Knight frank forecasts sunny skies for commercial property in 2015

The agency's latest report reveals that commercial property transactions in Europe last year are set to top €160 billion, 10 per cent higher than 2013. The major commercial sectors all attracted "strong interest", says Knight Frank, highlighting the increasingly mainstream profile of student property, as well as hotels and healthcare.

Indeed, student accommodation has ranked among the top 10 most popular property listings on TheMoveChannel.com for the past 14 months in a row, according to the portal's latest Investment Watch report.

Knight Frank forecasts a similar growth in 2015, with total transaction volumes expected to reach between €175 billion and €180 billion.

Darren Yates, Head of Global Capital Markets Research, said: "The really good news for both occupiers and investors is that rents in most markets remain lower than their pre-recession peaks – in some cases significantly below. This should provide a further boost to activity in 2015, with more occupiers looking to take advantage of good deals, while investors will seek to cash in on better rental growth prospects as the economic outlook continues to improve."

Andrew Sim, Head of European Capital Markets, said that demand had been driven in 2014 by the recovery of cities such as Madrid and Dublin, while buyers are expected to broaden out to smaller cities.

"Investors are looking to move increasingly up the risk curve to target good quality secondary stock," he commented, "in addition to development opportunities."

Occupier markets are likely to continue to move in line with wider economic trends, with the Nordic countries and the Baltics currently seeing a significant improvement in occupier sentiment, while the UK is finally seeing a pick-up in its regional city markets. However, perhaps the most encouraging trend is the rebound in some of the peripheral markets, notably Ireland and parts of Southern Europe, with Dublin and Madrid in particular recording solid rental increases in 2014 and further growth expected in 2015.

Despite the recent dip in economic performance, major French and German cities are also expected to perform well on the back of limited availability.

While there are some lingering doubts about the strength and uneven nature of Europe’s economic recovery, as well as ongoing influences from the Russia-Ukraine conflict, both the EU and the Euro area are poised for positive growth in 2014 and 2015, concludes Knight Frank.