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Think Europe: Don't let the past mislead you tomorrow

Stefan Wundrak

In our latest research report, Stefan Wundrak (Head of European Research) cautions against using historical data to shed light on future performance.

We examined prime headline rents from the late 1980s across 40 European office markets. Having analysed rental movement against inflation, GDP growth and land scarcity, we conclude that strong rental growth or decline periods are usually a result of one-off structural breaks at the city or macroeconomic level.

The report finds that it’s necessary to incorporate both cyclical and fundamental analysis of cities, or even sub-markets, to project where future rental values might be heading. Whenever real estate cash flows require a longer-term assumption of rental growth, appraisers regularly plump for inflation forecasts. However, the price development of potatoes, lawn mowers, baby food and all the other 700 consumer items in national CPI baskets, will have little bearing on the price of office accommodation in a particular city. Drawing conclusions from historical performance, about the future performance of a local market, can be highly misleading.

Download the report here 

Stefan Wundrak

Stefan Wundrak

Head of European Research

Stefan's biography