Total transaction volumes for the office market in Q1 2014 were 24% higher than during the same period in Q1 2013 and approximately 33% above the five-year average, according to Savills.

Total transaction volumes for the office market in Q1 2014 were 24% higher than during the same period in Q1 2013 and approximately 33% above the five-year average, according to Savills.

The broker's latest European market in minutes shows volumes were boosted by a strong increase in transactions in Spain (+490%), the Netherlands (+218%), Ireland (+164%), Austria (+140%) and Sweden (+100%).

Marcus Lemli, head of European investment at Savills, commented: 'Investor interest is broadening both regionally and across the risk profile with buyers looking for higher returns, this is reflected in the strong transaction volumes recorded in the year to date. Markets such as Ireland and the Netherlands, which recorded +43% and +31% growth respectively in volumes in Q1 2014 compared to Q4 2013, prove that recovery is coming to several countries.'

Savills reports that robust demand for Grade A offices helped yields to harden by 8 basis points to 5.3% on average, indicating a downward movement for the seventh consecutive quarter.

Looking at just the core markets of London, Paris and the German top five cities, the prime CBD office yield is as low as 4.3%, ranging from 3.25% in London’s West End to 4.7% in Berlin. Dublin’s prime offices have seen the highest yield compression year on year (-175bps) followed by Madrid (-50), both markets are now approaching pre-crisis levels.

The firm finds that, given the ongoing pressure on prime CBD yields, investors are increasingly looking to non-CBD areas and to regional cities in some markets. In the UK and Germany prime properties in the regional cities have seen a surge in demand, coming increasingly from cross-border buyers. Total transaction volumes increased by 91% in Manchester and 76% in Birmingham, while office investment jumped by 150% in Dusseldorf, 130% in Hamburg and 93% in Munich.

Julia Maurer, European research at Savills, added: 'Prime yields in London, Munich, and Frankfurt are at historically low levels, so well established regional economic centres may be a good investment alternative.'

Click on the link below for the Market in Minutes report.