London tops property acquisition list

The forward-looking PricewaterhouseCoopers and Urban Land Institute report also picked London to be the fifth best place for new developments this year, up 18 places, and fourth best for the investment performance of existing properties.

The UK capital's improved ratings for 2010 showed the significantly improved sentiment towards it, the report said.

An earlier survey by AFIRE in the United States, released on January 18, also showed London surged as the top destination for commercial real estate investment, beating Washington D.C. and New York.

ULI and PWC, which surveyed more than 600 industry players including investors, developers and bankers, said other popular European investment targets included Munich, Hamburg, Paris and Istanbul.

The overall market, however, still faced a long, slow haul to recovery, they said.

"We are looking at a crawl back up the hill, and how much values recover will depend on where Europe ends up economically against global competition," ULI Europe Chairman Alexander Otto said in the report.

The market also has to negotiate its way through the looming problem of refinancing of hundreds of billions of euros worth of real estate, and it was unclear how this would play out, ULI and PWC said.

Respondents were also worried that an abrupt withdrawal of stimulus funds by European governments could derail the nascent economic recovery, causing a return to recession and further hitting occupier markets.

"The key issue is the occupier side of the equation. Investors are nervous and they are concentrating on the deeper, more liquid markets," John Forbes, PWC's real estate leader in Europe, Middle East and Africa, said.