Across the total of 162 sector/city combinations throughout the EMEA region, 71 saw prime yields moving lower and none saw any increase over the quarter.
Prime yields fell across all main sectors, and are now generally 40-50 basis points lower than they were a year ago. The most marked shift was recorded in the industrial & logistics sector where prime yields fell by 20 basis points in the quarter, and nearly 60 basis points on the year, reflecting very strong investment appetite for the sector with nearly €12bn of assets traded in the past two quarters. Many of the major strategic European logistics hubs saw yields moving lower over the quarter, including Paris, Frankfurt, Rotterdam, Milan and Brussels.
The office sector saw slightly less pronounced changes (prime yields down by 18 basis points on the quarter; 47 basis points year on year) but did attain a notable milestone with yields dipping below their previous low of 2007, to stand at just under 5%. Retail yields also edged lower, though only marginally so in the high street sector.
By contrast, the retail sector led the way in terms of rents, with prime high street rents up 6.7% compared with a year ago. Prime London West End retail rents rose by over 7% Q on Q.Further notable rental increases were recorded in the German and Spanish office markets, and UK regional cities across all sectors. Across the survey as a whole, rental increases were rather sparse, with 30 of the 162 sector/city combinations recording higher rents and ten declining, several of them in the CEE region where there is more availability which is inhibiting rental growth.
“Falls in prime yields have been a feature of the market for three years now, and this quarter’s data gives every indication of the trend continuing, or even accelerating.This is linked with strong investment demand for real estate and a supportive capital markets environment characterized by low bond yields, low real interest rates and continued quantitative easing. On the rental side, while the pattern is certainly not clear-cut, there are indications that some of the early-cycle growth markets such as London and Dublin are heading into a period of slower growth, while some of the later-recovery markets notably Spain are beginning to pick up speed”, Richard Holberton, Senior Director, EMEA Research at CBRE, added.
Industrial yields fell sharply in Q3 2015, with the CBRE EMEA Prime Industrial Yield Index down by 20 bps in the quarter, and 60 bps over the year. Yields fell in 23 locations, and remained stable in the remaining 27. A number of markets saw falls of 50 bps or more including Milan, Brussels and Warsaw.
Prime industrial rents remained stable in Q3 2015, with the CBRE EMEA Prime Industrial Rent Index up by 0.5% in the quarter, and 1.4% in year-on-year terms. Seven of the 50 sample locations rose, four fell and the remaining 39 stayed unchanged. The risers included Dublin, Brussels, Glasgow and Lyon. The major fallers were again Moscow and St Petersburg. (source: CBRE)
