Prime commercial property rents and yields held firm in the third quarter amid negative economic news and nervousness in the financial markets, according CBRE.
Continuing the pattern that has emerged over recent quarters, prime rents saw little overall change across Europe in any sector in the three months to the end of September.
The CBRE EU-15 Prime Office Rent Index was broadly unchanged in Q3, up by a notional 0.1%, reflecting a year-on-year increase of 1.9%.
Eight of the 53 locations in the survey saw increases in the level of prime rent, four fell, and 41 remained unchanged.
The largest increase in Europe occurred in Moscow, where rents increased by 9.5% over the quarter to $1150 per sq m pa. Any rental declines were generally slight, but Sofia saw a decline of 3.6% to €162 per sq m pa.
Prime rents in the retail sector rose with the CBRE Prime Retail Rent index for the EU-15 up by 0.7% in the quarter and 4.3% over the year.
Seven of the 47 locations surveyed registered an increase, 40 remained unchanged, and none fell. Among the major centres, the largest increases occurred in the City of London – up by 5.6% to £950 per sq ft pa – and Milan – up by 5.3% to €4,000 per sq m pa.
The CBRE Industrial Rent Index for the EU-15 rose by 0.1% in Q3 and is down by 0.2% over the year.
Thirty six of the 46 locations in the survey saw the prime rent remaining stable, two fell, and eight showed an increase. The largest fall in Europe was in Vienna – down 1.02% to €58.20 per sq m pa. While the largest increases were in Istanbul – up 7.7% to $7.00 per sq m per month – and Rotterdam – up 4.5% to €70 per sq m pa.
Office yields across Europe fell slightly during the period, with the Prime Office Yield Index for the EU-15 down by four basis points in the quarter and 20 basis points against the same quarter last year.
Twelve of the 53 locations surveyed saw downward yield movements this quarter, 40 remained unchanged, and one saw an increase. The largest decrease was in Istanbul (down 75 basis points to 7.75%).
Retail yields were unchanged in the third quarter, with the CBRE EU-15 Prime Retail Yield Index down only two basis points to 4.96%. Ten of the 47 locations surveyed saw downward yield movements this quarter, 35 remained unchanged, and two saw an increase.
Industrial yields were effectively unchanged over the quarter, with the CBRE Prime Industrial Yield Index for the EU-15 down by one basis point, leaving it 15 basis points lower on the year. Ten of the 46 locations surveyed saw downward yield movements this quarter, 33 remained unchanged, and three saw an increase.
Richard Holberton, director of EMEA research at CBRE, said: “The market background over the past quarter has been dominated by concerns over the escalation of the eurozone sovereign debt crisis, and its possible market consequences.
“This has clearly heightened occupier caution towards new building commitments and tempered the rental recovery. At the same time we are seeing more evidence of tenants increasingly favouring modern prime space across all sectors, and as a result a growing polarisation between prime and secondary space.”
Holberton added: “Investment turnover actually rose marginally in the third quarter, but investors remain generally circumspect and heavily focused on core, prime assets. It is notable that, in the context of generally limited yield movement this quarter, Paris and the City of London were among the few office markets where yields moved lower, reflecting their attractiveness in terms of market depth and liquidity.”
bridget.o’connell@estatesgazette.com
