European commercial real estate markets saw further yield contraction in Q2 2015 across all property sectors, reflecting growing investor demand and very low bond yields, according to CBRE's latest EMEA Prime Rents and Yields survey.

European commercial real estate markets saw further yield contraction in Q2 2015 across all property sectors, reflecting growing investor demand and very low bond yields, according to CBRE's latest EMEA Prime Rents and Yields survey.

Across the total of 163 sector/city combinations throughout the EMEA region, none saw any increase in prime yields over the quarter.

Prime yields fell across all main sectors, to stand at least 30 basis points lower than they were a year ago. The second quarter alone saw yields narrowing by at least 10 basis points across all the main commercial sectors, and by as much as 15 basis points in the industrial and logistics sector. This reflected significant adjustments in some of the major hubs including Paris, Barcelona and Milan.

Office yields contracted in a number of major markets including London, Munich, Brussels and Paris while several important retail centres also saw yields shifts, including Dublin, Berlin and Milan.

Rental movements remain patchy, with the sector rental indices rising marginally, although more strongly in the retail sector. Notable rent rises over the quarter include the office markets in Dublin, Barcelona and the City of London; as well as the retail sectors in Milan, Rome and Prague.

Richard Holberton, senior director of EMEA research at CBRE, commented: 'There has been some recent volatility in European bond yields associated with concerns over Greece and the perception of a possible knock-on effect for a small number of countries in the region. Despite this, spreads between bond and real estate yields remain at very high levels, as does investment demand for real estate, so we expect the downward pressure on prime yields to persist. Evidence of rental momentum, which would further accentuate the downward trajectory in yields, remains limited but is expected to become more widespread over the coming months.'


Q2 2015 Yields – Change Quarter on Quarter
Industrial 6.9% - 15bps
Office 5.17% -13bps

Retail
High Street 4.40% -13bps
Shopping Centres 5.30% -10 bps

Number of Markets 163
Risers 0
Stable 84
Fallers 79

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