Despite a worsening short-term economic outlook for much of Europe, prime rents and yields for the region's commercial property remained broadly stable in the second quarter (Q2) of 2012, according to new figures released by CBRE.
Continuing the pattern of the past few quarters, prime yields rose slightly across all three main property sectors, reflecting a degree of investor caution and low transaction activity. However, the changes in yields remain moderate: over the past year, office and industrial yields for the EU-15 area are just 12 basis points higher.
Prime retail yields, despite increasing for the first time in twelve months in Q2, are still five basis points lower than this time last year.
Yields for prime assets rose in only 21 out of 145 markets CBRE monitors - mostly in southern European markets such as Italy and Spain where investor demand is weakest as well as in a number of regional UK cities, during the quarter.
Prime rents saw little change in the office and industrial markets in Q2, but there was some upward movement in the retail sector, reflected in a 2.3% increase in the CBRE EU-15 Prime Rent Index. Of the 19 locations where rents rose in Q2, 10 were retail markets. While there was no strong geographic pattern to this quarter's rent movements, office and retail rents did rise in a number of the German cities.
Richard Holberton, Director of EMEA Research at CBRE, said:
"With leasing and investment activity both prone to the effects of fragile sentiment, adjustments in prime rents and yields remain very gradual.
"In part, the apparent stability reflects a limited flow of transactional evidence, but the pattern of yield changes also increasingly reflects investor aversion toward markets most at risk from the Eurozone debt crisis. Rents remain more affected by local dynamics, with the rise in prime retail rents strongly linked to retailers' precise focus on the best locations."