David Hutchings is the head of the European Research Group, Cushman & Wakefield.

By David Hutchings

Recent events including June’s election result in Greece have temporarily stabilized the crisis in the eurozone but have also underlined the potential for Greece and other markets to be forced to leave at some point. Whilst still unlikely in our opinion, this is an eventuality that businessmen need to consider and prepare for.

There will in fact be numerous risks to face in the event of a country leaving the euro: financing, contracts, cash requirements, investment and of course exposure to suppliers, partners and other counter-parties.

Perhaps the biggest question for property is what happens to payments that are to be made under leases written in euros? No one is quite sure of the answer to that question but particularly for local players, market power is likely to determine who wins ­ and that lies with the tenants in today’s market. Hence one would expect rents to be converted to the new local currency and landlords to accept any depreciation risk.

It should also be noted that exchange controls may be needed and other forms of capital controls would be seen, as outflows of capital would be inevitable and the banking system would need to be protected.

People would also quickly be asking who is next if Greece did fall, with many fearing a domino effect that would hit Spain. Although Spain’s public finances look more sustainable than those of Greece, its banks are in trouble due to real estate and construction debt and plans to tackle that need to be accelerated. Italy is also in the spotlight due to its high public debt but seems more in control than most imagine if it can survive the current period of market volatility and uncertainty.

The banking sector in general would be a more likely victim of a domino effect starting with a Greek euro exit, impacting both on foreign banks exposed to Greece as well as on Greek banks themselves. As a result, the euro zone authorities are looking to create firewalls to stop problems spreading from the public to the private sector.

In the property market meanwhile, Greece is already suffering and an exit from the euro would inflict further pain on occupiers and investors.

Greece has been out of favour with foreign investors for a short while, with a total of just 50 million euro invested over the past 3 years, and over the past year its occupier markets have also seen weaker international demand.

Western European markets saw rental grow by 2.9 percent while Eastern European markets rose 5.8 percent in the past year. Greece however saw an 11.5 percent loss, with all sectors seeing double digit falls.

The office market has underperformed for some time ­ although it is hardly alone in that, with much of the eurozone not having yet recovered the ground lost since the credit crunch. Nonetheless, the European market has become more divided in recent months _ with Greek take-up down by 10 percent in the past year while the rest of Western Europe saw an increase of over 10 percent.

Retail markets are also struggling, with weak consumption, higher vacancy and rents falling, most notably on the high street rather than the somewhat more supply constrained shopping centre market.

Retailer demand tends to be somewhat better among café and food operators but many are looking to consolidate or renegotiate leases as they look to ride out this tough trading period.

Occupier markets will of course be beset with further uncertainty in the event of a euro exit and are likely to see rising vacancy as businesses fail, consolidate, delay or just stop making occupational decisions.

This would spell disaster for some investors but opportunity for others. Some hope of course that after short term pain, an exit from the eurozone may bring better conditions for growth in the future _ although opinions on this are divided and the scale of potential economic losses through the initial “adjustment” period would be severe and possibly enough to push Greece to the bottom of Europe’s wealth league.

Capital flight from an exiting country would certainly be strong and highly destructive _ both among foreign and domestic investors. It would also impact on other parts of Europe and the world as investors again adjusted their strategies and in the near term, uncertainty will only put more investor emphasis on the safest, prime global markets.

Looking beyond that, any pickup in demand from occupiers or investors after an exit from the euro would be slow ­ but could emerge from more opportunistic companies, looking at taking market share or at privatization offerings for example.

In the short term meanwhile, the best advice for landlords and tenants is to consider each property and lease separately, be ready to act and renegotiate but not commit too far in to the future.

David Hutchings is the head of the European Research Group, Cushman & Wakefield