The outlook for the European listed property market is the brightest is has been for four years, according to Thames River Capital.

In a statement, Thames River cited data indicating UK commercial property rents have outstripped inflation since 1986, and said property yields remain at “relatively high” levels compared to other sources of investment income.

Thames River said that most listed property companies are currently on a “sound commercial footing”. The company has noted “many prominent examples” of demand for real estate in the last 12 months, with numerous sovereign wealth funds increasing allocations to European real estate investment and some of the world’s largest pension funds concluding large-scale real estate transactions.

Vacancy rates and levels of bad debt have risen far less than during the property crash in the early 1990s, meaning absolute revenue levels fell less from peak to trough than was expected, Thames River said.

Further, the balance of supply and demand has improved more rapidly than forecast in a number of markets.

“We are particularly positive about the Central London, Paris, Zurich and Stockholm office markets, where rental values have risen steadily over the past 12 months. In the prime City of London office market net effective rental values (taking into account tenant incentives) have risen more often 25% in the last year,” Thames River said.

The company also noted increased M&A activity over the last year.

Thames River fund manager James Wilkinson said the firm is looking forward to a greater dispersion of returns across European markets.

“Whilst we are acutely aware of the various macro risks, we now see more reasons to be optimistic about the listed European property sector than we have for several years,” he said.

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