Yield compression beginning across European investment property
04 February 2010
Prime yield compression in the property sector across some continental European markets and sectors is starting to emerge, according to DTZ research.
This follows the trends in the UK market over recent quarters, underscoring the recovery in European investment market activity.
Magali Marton, Head of Continental Europe and Middle East Research at DTZ, said: “The recovery is most evident in the office sector, with four European markets registering a fall over the fourth quarter in contrast to just four markets in the retail and industrial sectors.”
In the office sector, the biggest shift was in Bucharest, where yields moved in by 100bps to 9%.
In France, Paris La Defense fell 25bps (to 6%) with two regional French markets also registering falls.
Elsewhere in Europe, yields in Luxembourg fell 20bps (to 6.2%) and in Berlin, prime office yields moved in by 15bps (to 5.55%). Only Dublin and Milan registered increases of 25bps to 7.5% and 6.25% respectively.
In retail, Hamburg registered a 30bp inward movement to 5.25% and Madrid a 25bp inward shift to 6.25%, whilst in the industrial sector, Moscow saw a 100bps inward shift to 14%, Prague registered a 50bps fall to 8.5%, and in the Netherlands, Utrecht saw a 30bps inward shift to 7.75%.
Magali Marton added: “The majority of other European commercial property markets saw stable yields for the second or third consecutive quarter, signalling that most markets have now reached their trough in terms of yield movements. Only in the industrial sector is the recovery patchy. With an imbalance between investor demand and supply, particularly at the prime end of the market, we expect to see a growing number of markets witnessing yield compression in 2010, with a clear polarisation between prime and secondary products.”