Economic development in the euro zone has started to pick up pace. Although the first quarter of 2018 saw a marginal slowdown, the actual rate of growth was resilient for the euro zone (+0.4 percent) as a whole, according to BNP Paribas Real Estate. This was supported by strong growth in Germany (+0.3 percent), Netherlands (+0.5 percent), Belgium (+0.32 percent) and particularly Spain (+0.7 percent). In the United Kingdom (0.1 percent), where uncertainty about the Brexit outcome persists, growth has slowed considerably. For the year 2018 as a whole, we anticipate an above trend growth for the euro zone (+2.2 percent) and a moderate growth for the United Kingdom (1.5 percent). The increased pace in economic growth will most likely be accompanied by improving inflation rate.
Rents evolved only marginally and our net effective rent index remained very stable over the past six months. Prime headline rents rose by just 6 percent over the past five years in the main European markets whilst between 2012 and 2017, inflation increased by just 3.8 percent in Europe.
Spain and the United Kingdom recorded some of the strongest growth over the past five years reflecting a catching-up effect after low values and reduced activity recorded in the years 2011 and 2012. This was combined with a pent-up demand in 2015 and 2016 and a lack of availabilities, which put an upward pressure on rents.
Since the beginning of 2017, rents have continued to increase slightly in markets (Berlin, Prague, Bucharest, Central Poland, the Baltic countries, Milan, Lyon) that have been catching up with core markets. Rental growth remains overall pretty subtle. During the first quarter, 2018, rents were particularly stable in Europe.
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