TEXT-Moody's comments on Euro industrial real estate markets

(The following statement was released by the rating agency)

Oct 23 - European industrial real estate markets that support commercial mortgage-backed securities (CMBS) have shown some resilience over the past 12 months, says Moody's Investors Service in its latest Special Report on the sector. The report is the tenth semi-annual update of Moody's Red-Yellow-GreenB. analysis of the European industrial markets.

The Red-Yellow-Green report assesses the strength of the European office occupational markets that support CMBS.

The reports are based on actual data and 12-month forecasts of market supply-and-demand movements.

The analysis covers eight major European industrial regions including Birmingham, Greater London, Leeds/Yorkshire/Humberside, Manchester, Barcelona, Brussels, Paris Ile-de-France and Rotterdam. "Between mid-year 2007 and mid-year 2008, the weighted-average composite score for the European industrial markets covered by Moody's analysis remained relatively stable at 70 compared with 71 a year ago, which indicates a weak green market," says Oliver Moldenhauer, a Moody's Assistant Vice-President Analyst and co-author of the report.

"The composite score remained stable as one out of the eight markets analysed was reclassified upwards and one downwards. However, four of the eight markets are yellow."

Over the past 12 months, the Birmingham West Midlands market was reclassified from green to yellow. The Brussels occupational market moved from red to yellow, while several other markets showed some signs of transition. Overall, the demand-supply ratio is positive.

However, the ratio is expected to deteriorate due to a projected demand decline in the UK of 37% by mid-2009 while forecast construction is projected to decline by only 27%.

"The stable scores for the industrial occupational markets indicate some resilience to the downward pressures the markets are currently facing but since the data was assimilated in H1 2008, the recent turmoil in the financial markets and deterioration of the global economy is not fully reflected in these scores" says Jeroen Heijdeman, a Moody's Analyst and co-author of the report.

"Moreover, continuation of some of the recent financial difficulties and the knock-on effect on the real economy could result in a deterioration of the industrial occupational markets."