There has been a notable slowdown in the rate of yield compression as office letting showed 'healthy' activity during the third quarter of 2006, according to the latest CB Richard Ellis market view on the EMEA office market. While the average prime yield fell by 25 basis points to 5.05% in the first half of 2006, the fall in the third quarter was only another two basis points.

There has been a notable slowdown in the rate of yield compression as office letting showed 'healthy' activity during the third quarter of 2006, according to the latest CB Richard Ellis market view on the EMEA office market. While the average prime yield fell by 25 basis points to 5.05% in the first half of 2006, the fall in the third quarter was only another two basis points.

Take-up reached 2.7 million m2 in the scan of the 15 largest cities. Occupier consolidation and relocations were key driving factors. 'In particular substantial increases in take-up were seen in London City and German market, especially Frankfurt, Berlin and Hamburg,' the report said. Healthy demand was reflected by falling vacancies. with the CB Richard Ellis dropping to 8.4% at the end of the third quarter of 2006. 'The most notable decreases in vacancies have been recorded in London, Dublin and Barcelona,' the researchers said., adding that in light of continued strong demand the vacancy rate will continue to fall across Europe.

CB Richard Ellis said rents in several key markets have continued to increase. 'Moreover, even in many of the cities where headline rents are stable, incentives are starting to fall. 'The highest quarterly rental growth was recorded in London City at 6%, reflecting the robust demand there for office space.