Prime rents and yields remain stable in Europe: CBRE

Prime commercial property rents and yields held firm in the third quarter despite the flow of significantly negative economic news and nervousness in the financial markets, according to the latest figures released by CBRE.

Continuing the pattern that has emerged over recent quarters, prime rents saw little overall change across Europe in Q3 2011 in any sector. The CBRE EU-15 Prime Office Rent Index was unchanged in the third quarter, with the vast majority of constituent locations seeing no change in the prime rent level. Industrial rents were similarly flat, while high street retail rents continue to see the strongest growth albeit up by only 0.7% this quarter.

Richard Holberton, director of EMEA Research at CBRE, said: 'The market background over the past quarter has been dominated by concerns over the escalation of the Eurozone sovereign debt crisis, and its possible market consequences. This has clearly heightened occupier caution towards new building commitments and tempered the rental recovery. At the same time we are seeing more evidence of tenants increasingly favouring modern prime space across all sectors, and as a result a growing polarization between prime and secondary space.'

With a high degree of economic uncertainty and limited rental momentum, prime yields also saw little change in the third quarter. Yields in each of the three main sectors fell by less than four basis points in Q3, with yields in most locations unchanged from the previous quarter. Any yield changes in the core Western European markets were mostly slight, with larger changes confined to peripheral or emerging markets.

Holberton continued: 'Investment turnover actually rose marginally in the third quarter, but investors remain generally circumspect and heavily focused on core, prime assets. It is notable that, in the context of generally limited yield movement this quarter, Paris and the City of London were among the few office markets where yields moved lower, reflecting their attractiveness in terms of market depth and liquidity'.