EUROPE - Yields across all commercial sectors in Europe, Middle East and Africa markets have increased in the fourth quarter of 2008 and may reflect a poor outlook for rents, according to latest data from the CB Richard Ellis EU-15 yield indices.

Office, retail and industrial yields have risen by 100 basis points since mid2007 as a result of the turmoil in the debt and investment markets. Prime office yields were the most affected, rising by 41 basis points in the fourth quarter of 2008, 100 basis points higher than the same time last year.
Richard Holberton, director for CB Richard Ellis EMEA Research and Consulting, said: "The combined effects of the various upheavals in financial markets in the fourth quarter of last year, and the weakening economic outlook, are clearly evident in the near-universal rise in yields.

"In addition to reduced liquidity, pricing is increasingly reflecting the prospect of weaker occupier demand, and hence lower income growth potential in many locations," he added.

Of the 47 locations surveyed for the CB Richard Ellis EU-15 Office Yield Index, 42 saw yields increase, with Kiev and Dublin experiencing the highest yield movements, up 500 and 200 basis points respectively.

The CB Richard Ellis EU-15 Industrial Yield Index increased by 35 basis points in the fourth quarter of 2008, nearly 100 basis points higher than the same time last year, while the CB Richard Ellis EU-15 Retail Index rose by 31 basis points, up 78 basis points from 2007.

According to Holberton, however, the widespread rise in yields means the level of re-pricing is likely to produce attractive buying opportunities for equity investors in 2009.

CB Richard Ellis' report warns there are growing indications of downward pressures on rents across many countries as a result of reduced confidence in the occupier markets.

"While the annual growth rates for the office and retail sectors remain positive there is a growing incidence of actual rental declines as occupier confidence continues to weaken. This reflects widespread occupier caution stemming from the general economic uncertainty," said Holberton.

The CB Richard Ellis EU-15 Office Rent Index fell by 2% in the fourth quarter but showed a positive year-on-year rate of growth of 0.4%. Only two of the 47 locations reported on saw increases in the level of prime office rents, while 19 declined and 26 remained the same. The steepest declines were in Kiev, down by 29.4% and Tel Aviv, down 28.5%. London's West End declined by 15.22%.

Prime retail rents remained fairly stable, rising marginally by 0.3% in the fourth quarter and bringing the year-on-year rate to 2.8%. Of the 40 locations surveyed, Lyon and Vienna saw increases in retail rents. Of the remainder, seven declined and 31 remained unchanged.

Industrial rents also stayed fairly even, while the Industrial Index fell 0.4% in the fourth quarter and by 1.3% in year-on-year terms. Six out of 40 locations saw increases in prime rent, including Edinburgh and Warsaw, up 7.4% and 6.7% respectively. Seven of the locations experienced declines and 27 stayed the same.

CB Richard Ellis' European, Middle East and African operations currently has over $16.9bn (€12.7bn) investment assets under management.

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