LONDON (Reuters) - A hoped-for turnaround in European real estate is unlikely to materialise this year, with the markets' optimism hammered by the weak economic recovery and persistently poor debt conditions, a survey said on Friday.
PricewaterhouseCoopers (PwC) and Urban Land Institute (ULI), which interviewed 600 industry players including investors, developers and bankers, said respondents' hopes of a quick rebound in last year's survey has waned this year.
"In January 2010, the sunny uplands did not seem too far away, but they do now. Optimism dissipated as every month came and went. It was battered by events," ULI and PWC quoted one interviewee as saying.
The property industry also faces the threat of further shocks from stressed countries such as Italy, Portugal, and Spain, the report said.
The sharpest wake-up call in 2011 will be felt in the secondary, or "non-prime," property market, where many believe the real hangover from the bursting of the property bubble in 2008 has not yet set in, it added.
Ratings agency Moody's reported this week that commercial mortgage-backed securities for non-prime properties in EMEA, especially the UK, are at higher risks of downgrades this year as weak lending conditions persist.
Interviewees in the PwC and ULI report predicted that one of the biggest themes for 2011 will be the continued downsizing of the European real estate industry, with further job losses as companies clear out the less essential roles.
"There were too many of us knocking around before. Over the long term, our industry will operate in a much smaller space," said one respondent, while another noted the lack of experienced people "who understand how to manage risk."
Most investors expect their focus for 2011 to be on just a few "winning" cities and countries where occupational demand will be firmer, mainly in the core Western Europe markets of the UK, France and Germany.
"Outside of the UK, France, and Germany, the main markets will be Sweden, Poland, Italy, and Spain, and nothing else is worth having a conversation about," said one interviewee.
Reporting by Daryl Loo; Editing by Andrew Macdonald