European office property is expected to deliver rental growth of between 2.5-3% pa over the next five years, particularly in key financial centres across northern and western Europe, according to Fidelity.

The company report claims there are increasing fears of a double dip recession, with gloomy predictions about the outlook for rental growth from other forecasters, as prime headline office rates have fallen over 10% in the last two years and rental growth remains negative across the overall market.

Matthew Richardson, director of research at Fidelity, said: “Our own analysis indicates there is scope for positive surprise in many prime European office markets, with particularly punchy rental growth in some key financial centres.

“The market’s pessimism on rental growth expectations over the next 12 months is well founded, but we believe market consensus over the medium term prospects is being overly bearish. Just as people over-estimate how long growth will continue in an upturn, so we think people are over-estimating how long zero or falling rental growth will continue.

“The loss of jobs in the financial sector was not as severe as many analysts expected at the outset of the recession. We have recently seen employment growth in the financial and business service sectors of London, Paris CBD and Stockholm CBD as businesses re-gear.

“Another key reason for our positive outlook on western European markets is the supply side. The supply picture is constrained by historical standards. In 2011, completions are projected to be just 1.1% of existing stock, at their lowest since 1980.”

Fidelity have forecasted that there will be a growth of 4% pa in the ParisCBD market, with Paris La Defense seeing 5% pa, StockholmCBD 5% pa and MunichCBD 3% pa.