The survey found that the increasing effects of the financial turmoil, together with worsening global economic conditions, have begun to exert substantial pressure on trading performance expectations. “Both short-term and medium-term expectations turned negative across the region and investors are adopting a very bearish outlook for the coming six months. Expectations in the medium term were only marginally negative but the fall was the largest that we have experienced over the life of the survey,” said Mark Wynne-Smith, CEO of Jones Lang LaSalle Hotels in EMEA.
Overall, trading performance expectations in the medium term prove more optimistic. Strongest medium-term expectations were reported for Moscow, Paris, Rome and London. Moscow is expected to have strong income growth potential in the longer term. Germany, too, was expected to weather the storm relatively well.
“Yield requirements have softened across all cities. The greatest increase in yield requirements has occurred in Central and Eastern Europe. The gap was narrowing until the end of 2007 but recent events have rapidly reversed this trend. We expect the gap to widen further with investors expecting more severe softening in Eastern European yield requirements in the coming months compared to those in the West. The range between best and worst has also increased hugely,” said Wynne-Smith.
Although the region remains dominated by the buy sentiment, more weight has been given to sell and hold intentions. The current uncertainty in the economic environment has in particular had an impact on build intentions, which fell by 7 percent across the region. Investment intentions have remained strongest in Western Europe and even increased in the UK. Mark concluded: “This may be based on expectations of fairly priced opportunities across the country as it struggles with the economic recession and a weakening property market. The first signs of distress are starting to appear amongst secondary assets but this will accelerate towards summer 2009.”