Secondary office investment drops to 10-year low

Investment in secondary offices across Western European markets is at its lowest level in 10 years, according to research from BNP Paribas Real Estate.

The report analyses the performance of second-tier offices in 16 secondary locations across Western Europe. It uncovered flat market trends despite deteriorating economic indicators. 'Office investors are generally still averse to risk and remain focussed on prime assets and locations. Prime yields have remained at low levels but there is a possibility that these will move upwards as the eurozone crisis continues,' said BNP Paribas Real Estate’s international investment director Andrew Cruickshank.

Occupational take-up increased by just 2% in the first quarter of 2012 on a rolling year basis compared to the last quarter of 2011. A few markets were boosted by some large transactions over the previous 12-month period but the gap between supply and take-up remains high and the risk of vacancy is set to increase if economic conditions worsen.

'Prime rents demonstrated a strong resilience, again reflecting the lack of new supply in prime locations and office investment in the second-tier markets hit its second-lowest volume in ten years, proving less resistant than the main markets led by Paris, London and the major German cities,' Cruickshank added.