Capital Economics has forecasted in a report that all European commercial property markets will achieve positive total returns in 2010-11.

Russia, Turkey and Poland are expected to provide the highest returns outside the Euro-zone as they currently have high levels of rental yield, with Norway also looking comparatively good. Hungary and Romania meanwhile are the weakest, with yields likely to merely stabilise.

The report did state however that although Russia should see strong returns, it is somewhat an opaque market and does not offer a good risk/reward trade off.

The best performing Euro-zone markets will be France and Germany according to the report, with Germany receiving higher returns in the retail and industrial sectors whilst France achieves better returns in the office market. It predicts that the Netherlands and Belgium will also do quite well, but as the Irish, Spanish and Greek economies will continue to be weak the total returns will be poor. Also, Swiss yields have little scope to decrease as they have not changed since their 2007 low.

It stated: ‘ We are more optimistic about the outlook for property returns in non-Euro-zone European markets than in our previous forecasts. Taking a five-year view, we think it plausible that total returns could average between 4-10% per annum in most cases.’

Yields are expected to drop by -0.5-0.6% in the UK and Norway, but they should still offer the highest total returns. Yields are expected to fall by -0.2-0.4% across the rest of the non-Euro-zone, with Denmark and Sweden looking particularly unattractive to investors because of poor valuations.