European prime yields stabilise: CBRE

Prime rents stabilised across Europe during the first three months of 2010, with the majority of markets showing little or no change in any sector, according to CB Richard Ellis's latest EMEA Rent and Yield Indices.

This was evident in the Dublin market, where rents in all sectors, having experienced some of the more significant falls from peak across Europe have essentially stabilised in recent months.

There are now signs of growth in a handful of geographic markets, with sectoral growth most evident in the office index which showed its first quarterly increase in Q1 since the start of the downturn. This office rental growth is being heavily driven by increases in Paris and London and is particularly significant given the office index registered the largest sector falls in the previous quarter. This turnaround is also reflected in the fact that the office market is the sector experiencing the most significant decline in yields, with nearly half of the office locations monitored recording a fall in Q1.

Commenting on these changes, Marie Hunt, Head of Research at CBRE, Dublin said: 'The industrial and retail sectors remained broadly flat in the first quarter, with little change in either rents or yields. The Irish market is firmly following this trend. Following dramatic increases in yields and falls in rents over the last two-year period, all sectors have remained stable quarter-on-quarter.

'However, there has been a turnaround in office market performance in Europe, driven mainly by the core markets of London and Paris. The City of London stands out as a key example, where rents increased by almost 10% and yields contracted by a further 50 basis points in the last quarter. Whilst occupier demand is clearly gaining some momentum elsewhere in Europe, this may take longer to translate into significant rental growth. Vacancy levels are higher in many of the markets in Europe than in the core Paris and London markets and it will take time to absorb this excess supply.'