But the firm is emphasising the importance of active management as the global credit contraction hastens the end of indiscriminate yield compression and drags on activity from highly-leveraged investors, and managers are forced to look beyond rising property prices to maximise rental yields for their returns.

“We’ve had a golden age of property returns,” said head of investment strategy, Alessandro Bronda.

“But capital growth cannot be as strong as it has been in the past. The end of the yield compression will mean that active management capabilities, such as those of Aberdeen, will become more important.”

In the office sector the firm picked out France, Norway, Sweden and Ireland as regions to watch. The story in France is simply one of undersupply; in the Nordics and Ireland an added factor is good employment forecasts.

In addition, the credit contraction could spark a flight to quality, with investors moving to the bigger, more liquid markets such as London, Paris, Madrid and Stockholm.

Emerging Europe looks set to enjoy relatively good economic growth, but investor competition in these markets has already started having an impact.

“Some East European markets are clearly overpriced,” said Bronda. “In these markets especially the risk premium is very low.”

The firm was far more bullish on Russia – it is opening a St Petersburg office in September with a new team from Baltic Property Trust, to run a forthcoming Russia fund.

Elsewhere in Europe, retail is favoured because it is less sensitive to the demographic trend for falling workforce numbers.

MS

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