European prime yields edge down: CBRE

The pace of adjustment to European commercial property prime yields slowed in the fourth quarter of 2010, contrary to larger shifts in prime value measures seen in previous years. Prime yields continued to fall across the region, but the speed of movement has clearly slowed, marking a period of transition for investors of European commercial property, according to CB Richard Ellis (CBRE).

Falls of seven basis points or less were recorded across the office, retail and industrial sectors, according to CBRE's latest EMEA Rents and Yields Indices. Prime rents remained broadly flat over the fourth quarter of 2010. Against this general background, the office sector stood out, with the largest yield reduction and highest year-on-year rate of rental growth of the three main sectors.

Office yields across Europe fell during Q4 2010. The CB Richard Ellis office yield index for the EU-15 fell by seven basis points in the quarter and 35 basis points from the same quarter last year. Twenty-three of the 56 locations in the survey saw downward yield movement, 31 remained unchanged and just two saw an increase.

The largest yield reductions were in Bucharest (down 50 basis points to 9%) and in Budapest, Oslo, Bratislava, Barcelona, Madrid and Gothenburg, which all saw yield reductions of 25 basis points. The largest increases were in Thessaloniki and Dubai, where yields rose by 25 basis points to 8.25% and 8.75% respectively.

Retail yields fell during the quarter. The CB Richard Ellis retail yield index for the EU-15 fell by five basis points in the quarter and 26 basis points from the same time last year. Eighteen of the 50 locations saw downward yield movements, 31 remained unchanged and just one saw an increase. The single increase was in Athens where yields rose by 25 basis points to 6.75%. The largest yield reductions of 50 basis points were in Oslo and Bucharest, where yields fell to 5.5% and 10.5% respectively. There were also 25 basis point falls in Paris, Brussels, Budapest and the City of London.

Industrial yields were effectively flat during the quarter. The CB Richard Ellis industrial yield index for the EU-15 fell by just one basis point in the quarter and 21 basis points on the year. Seven of the 47 locations in the survey saw downward yield movements, 40 remained unchanged and there were no upward movements. The largest yield reductions of 25 basis points were in Brussels (down to 7%), Prague (8.5%), Bucharest (10.25%), Edinburgh (7%) and Glasgow (7.25%).