LONDON-Europe’s economic recovery is on track despite the noise from a volatile euro and the sovereign debt crisis in Greece, says LaSalle Investment Management. European office markets will recover in the next 12-24 months and prime rent growth will become more prevalent, extending beyond London which has seen most gains so far.

The main European economies of Germany, France and the UK, plus most of northern Europe, are seeing increases in output again after the 2008/09 collapse. Central and eastern Europe is taking longer to turn the corner, with a number of nations struggling to expand - though growth should return in 2011. Poland is an outlier, having avoided recession.

The conclusions were contained in an interim update following the company’s Investment Strategy Annual in December 2009. At the halfway point of 2010, said the group: “Each country is responding differently to the various stimulus packages .. in response to the financial panic and subsequent economic collapse of 2008-2009. The performance of investment real estate also varies greatly from market to market. The 2008-2009 credit crisis was nearly synchronous across the developed markets of the world. The recovery is not.”

The global crisis, though not without precedent, was historic in its scale and scope, shrinking world output for the first time in 60 years. The unprecedented, interconnected nature of the credit crisis will also shape a global recovery unlike any before. The drivers will play a major role in the performance of commercial real estate – in both mature and emerging markets. “At this point, it is already clear that the characteristics of this recovery are going to be unlike any other in recent economic history,” the company said, noting that the IMF has coined the term ‘multi-speed recovery’, to emphasise very different economic growth trajectories.

The company said the euro crisis provides an unhelpful background for real estate fundamentals and is a risk to German and French markets through their banks. However, real estate investment demand has now bounced back strongly, with equity inflows principally attracted from open-ended funds of Germany and the UK. The debt market is also starting to loosen. Senior loans are available for good income producing assets in all the main markets for deals of up to at least $132 million, up from just $66 million six months ago.

Allan Saunderson is a managing editor of Property Investor Europe and a contributor to GlobeSt.com.