Trading activity in European commercial property rallied in late 2012 as the market stabilised after its mid-year malaise to post the highest level of quarterly trading since 2007.
In the final quarter alone, investment volume totalled €43.7 bn, according to the latest data from property consultants Cushman & Wakefield.
Whilst the year ended only marginally - or 1.5% - up on 2011 with total volumes reaching €133.8 bn, the report predicts that recovery in the sector will start to gain momentum in 2013.
Improvements in economic stability and investor confidence will drive further increases in trading activity against a backdrop of increasing divergence within the sector, with some markets seeing strong demand and robust performance as others stagnate.
David Hutchings, Head of European Research at Cushman & Wakefield, commented: 'Risks obviously remain high in much of the region but underlying economic stability has improved and even with a fragile recovery on the cards, this should set the scene for improved confidence in 2013.
'Property is well priced to attract buyers when the real but secure nature of its performance is considered. As a result we are forecasting a further increase in trading activity this year, with increased bank sales and a somewhat more relaxed debt market pushing volumes up 5-6% to €141 bn.'
Hutchings said economic stability would also help to generate and release some degree of pent up demand among occupiers, with stronger industries and regions adding to a very mixed picture for property. A reappraisal of risk will force a further re-pricing in some areas - with prime yields compressing while secondary yields move out - and new hot spots will emerge even as distressed or uncompetitive markets fall back further in a splintering market.
Investors are heavily focused on core, larger liquid markets - although over the year France, the UK and Germany saw their market share slip slightly, to 61% from 62% in 2011. The Nordics have gained ground, with market share up to 17.9% from 15.3% in 2011, with Finland (up 98%) and Norway (up 59%) the most dynamic. Elsewhere in the west some markets slipped, notably the Netherlands and Luxembourg, but Switzerland more than made up for that with a trebling in deal volumes sparked by bank sales.
The main losers by deal volume are closely correlated with macro risk - with the GIIPS (Greece, Ireland, Italy, Portugal and Spain) seeing a 26% fall in activity, taking their market share down to just 3.8% versus a 10 year average of 11%. Other weaker markets included the Netherlands, the Czech Republic and Hungary.