Expectations of higher returns from prime real estate are being underpinned by hopes that capital values will remain strong in most European markets, said Chris Urwin, Global Research Manager for Aviva Investors, the investment arm of British insurer Aviva. “As investor appetite continues to increase, selective strategies across Europe, in particular in the Nordics, Germany and UK are worth careful evaluation,” he said.

Germany has become the safest market from a macroeconomic perspective, Aviva found in a study. And despite worsening economic conditions, the UK is one of the strongest markets for risk-adjusted real estate returns, alongside Finland and Sweden.

Swedish retail should appeal to investors, with British and Finnish offices also relatively attractive, Aviva said. Ireland, where falls in property values wiped billions off the economy and helped push banks to the brink, also now presents better returns for commercial real estate as the economy recovers and macroeconomic risks subside. However, southern European countries remain among the weakest from both a macroeconomic perspective and a property investment point of view. Risk-adjusted returns are least attractive in the Spanish and Italian retail sectors, said Aviva, which manages £274bn in assets.

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