Prime office yields continue to stabilise across Europe, says JLL

Prime office yields across Europe have continued to stabilise during the third quarter of 2009, in a further sign that the bottom of the investment cycle is in sight, property consultant Jones Lang LaSalle said on Wednesday. According to the broker's latest Prime European Office Yields Tracker, the aggregate yield moved in by five basis points over the quarter to 6%, and this was accounted for mainly by movement in Western Europe, with yields in CEE remaining flat. Only three markets witnessed yield decompressions (Eindhoven, Bucharest and Utrecht).

Of the 46 markets tracked, 10 locations experienced yield compression during Q3 2009 from between 50 bps in Leeds to 5 bps in Brussels, Gotheburg and Malmö, while London West End moved in by 25 bps. London City remained static, but moved in by 25 bps during Q2 2009.

However, despite the continued trend of yield stabilisation across Europe prime office yields still remain above their levels this time last year and well above peak yields in 2007, while yields in secondary markets continued to move out. Moscow currently sits 400 bps above Q3 2007 levels, while Bucharest is up by 275 bps and Warsaw 125 bps. Stockholm, Paris and Helsinki all sit 75 bps above their Q3 2007 levels.

'Investor appetite continues to focus on prime, income producing assets in core locations. There is a renewed willingness to enter competitive bidding processes for certain situations and drive new pricing levels for the best properties let to secure tenants,' said Chris Staveley, head of the Pan European Capital Markets team at JLL. 'London remains at the forefront of investor interest with Paris close behind, but with a growing lack in supply of suitable opportunities investor demand will be forced to look at new locations around Europe.'