Germany is expected to lead the recovery in the Euro-zone as its economy is well-positioned to benefit from improving global demand, according to Aberdeen Property Investors.

Recent tax cuts and a steady labour market have supported consumer spending and although the recovery did stall toward the end of 2009, there are signs that it will resume this year, aided by an increase in exports.

The report stated that after an unsustainably high investment volume recorded during the boom years of 2006 and 2007, the reduction seen in 2008 continued into 2009 with a serious collapse in the investment markets during the first half of 2009 of -77%, the second half saw a clear revival however as approximately €11.5bn of commercial property investments (including residential portfolios) changing hands. Consequently, a reduction of just -56% was recorded in 2009 compared to the previous year.

Prime yields rose for commercial property in 2009 by just +0.1% both in central as well as adjoining established locations, with minor reductions already being recorded in some cities in Q4. In decentralised submarkets, prime initial yields increased by about +0.3% during the course of the year.

It said: ‘Based on a change in the mood of the market and improved financing terms, we anticipate a further increase in transactions in 2010, resulting in some yield compression. It is to be expected that the largest investor group in 2010 will again be domestic investors who will seek assets that provide a high degree of secured income and are expected to invest with moderate gearing.’