At a country level, the best opportunities in real estate lie in the core northern European markets; at a sector level, retail and industrial are most attractive, and most European office markets are overpriced, according to latest research form Aberdeen asset management's property research unit.

Short term leading indicators suggest capital values will dip again over the next year, particularly for secondary property and southern Europe. Spain and Ireland are projected to deliver poor performance in the short term, said John Danes, director, Property Research in a briefing note.

However, long-term leading indicators suggest Spain and Ireland are becoming more attractive for long-term investors, with opportunities to buy high quality core assets at substantial discounts to current valuations. City level analysis highlights substantial overpricing of offices in ‘gateway' cities and for such assets, tactical disposals should be considered, Danes said."It certainly implies minimising risk: removing voids, securing tenants on long leases and not undertaking speculative development."

Business sentiment indicators have continued to deteriorate into 2012. The eurozone looks set to experience recession in 2012, exacerbated by widespread government spending cuts. Despite much talk of a breakthrough, in reality there is no comprehensive solution to the eurozone crisis.

In the capital markets, funding costs have continued to rise for commercial property,even in relatively strong markets such as the Nordics. Banks remain under pressure to increase their capital base inresponse to the sovereign debt crisis, as well as Basel III, which isprojected to result in more secondary stock coming onto themarket over many years, depressing prices.