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··· 14 ···
In Greater Paris, the Île-de-France, office premises
were in strongest demand, accounting for more
than 80% of all real estate investments. Foreign
investors, led by those from the US, accounted for
75% of all transactions. The attractiveness of the
office property market means that the level of
excess demand remains as high as ever, causing
yields to fall further, lying at around the 5% mark
for top properties. The solid rental market coupled
with the favourable interest-rate level will keep
demand strong and yields low.
In Spain domestic demand remained strong in the
first half of 2005. Once again, it was private con-
sumption coupled with investment in construction
projects that got the Iberian economy moving. The
reasons for the ongoing boom in consumption lie
in the low level of real rates, the increase in
employment and residential property prices. But
this trend is not without its risks. If property prices
stop rising or should interest rates creep up, the
current level of willingness to spend on the part of
Spanish consumers, who are now relatively highly
indebted, would start to wane. This would also
impact on the keen level of building activity cur-
rently in evidence.
Demand for office property in Madrid remains
high. However, rental prices are being damaged by
the high vacancy rates, particularly in some areas
of the city, and by the large number of new builds.
The vacancy rate in Barcelona is falling, albeit
more slowly than last year, with positive growth in
rent levels not expected until later in 2006.
Consumer and industrial confidence in the
Netherlands remains low. GDP was falling again
at the end of the first half of the year, unemploy-
ment is high, and there is a general mood of
uncertainty as far as the country's economic futu-
re is concerned.
Hopes are once again being pinned on exports.
The improving state of the economy in neighbou-
ring Germany, which takes up around a quarter of
Dutch exports, as well as the stable global
economy, are contributing to an optimistic outlook
for the second half of 2006, the hope being that
the momentum from foreign trade will see the
country catch up again in terms of investment
and, at the same time, support private consump-
tion and consequently the weak retail sector.
The property markets in the Netherlands and, in
particular, the office property segment, remain
weak. Little is changing with regard to the excess
supply of office properties in Amsterdam and this
will continue well into 2006.
·· USA
In the USA the two key factors generating uncer-
tainty remain the high levels of private debt and
the deficits in the balance of payments and state
budget. Nevertheless, strong economic growth
was maintained in 2005. Even hurricane “Katrina”
caused little more than a short-lived upset, failing
to have any long-term impact on the dynamic level
of private consumption. The effects of a more
restrictive monetary and fiscal policy will not be
felt until 2006 at the earliest in the form of more
moderate consumption growth.
On the USA property markets, the conurbations
continue to enjoy a high level of demand for pre-
mises and rental activity that is strong as ever,
with the number of construction projects falling
slightly. These developments are affecting all of
the key property types to the same extent. The