Higher risk premiums have generated further upward pressure on yields, with average prime office yields having moved out by 60 basis points over the last 12 months, according to Savills' latest European office markets report. The report states that the average CBD yield is 5.5% with cities such as Amsterdam, Athens, Lille, London and Oslo seeing increased yields to over 5.60%.
Higher risk premiums have generated further upward pressure on yields, with average prime office yields having moved out by 60 basis points over the last 12 months, according to Savills' latest European office markets report. The report states that the average CBD yield is 5.5% with cities such as Amsterdam, Athens, Lille, London and Oslo seeing increased yields to over 5.60%.
In terms of rents, the report shows that annual rental growth remains positive in most CBD's with Frankfurt, Hamburg, Istanbul, Warsaw and Zurich showing particularly sharp increases. However, the research also reveals that prime rental levels came to a standstill during the second quarter of the year and, as a result, the gap between prime and secondary rents is widening.
'Longer decision-making processes, tighter negotiations and more conservative approaches have been reflected in the European office market and we expect further rental and yield adjustments in the main business centres before the end of the year,' said Lydia Brissy, from Savills' European research team.
With regard to office take-up, reduced figures combined with a significant amount of development undertaken over the last two years has led to increasing vacancy rates across Europe however, this is expected to reduce as there is a continued shortage of modern office space in many sought-after locations. In addition, the number of speculative schemes is predicted to decrease, again, helping to reduce the vacancy rate.
