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Rents up, yields down

Rafał Ostrowski 05 February 2019

Rafał Ostrowski

Journalist

+48 22 356 25 11
rafal.ostrowski@eurobuildcee.com

Rafał Ostrowski has over 17 years’ experience as a journalist. Before joining ‘Eurobuild CEE’ five years ago, he wrote for Wydawnictwo Murator and Shopping Centre Magazine, as well as for retailnet.pl. He has also written for many newspapers and magazines as a freelancer and prepared photo-reportages. Rafał graduated from the University of Warsaw in philosophy. He also completed postgraduate studies in text editing. For ‘Eurobuild CEE’ he covers most real estate sectors, including logistics, construction, office, residential and retail. He is also in charge of the film direction for Eurobuild TV.

EUROPE The fourth quarter of last year brought large increases in rents for the office and industrial sectors across Europe, while retail rents dropped slightly, according to Cushman & Wakefield’s latest DNA of Real Estate report.

“The office and logistics sectors were the main engines of growth during the fourth quarter – as they were across 2018 as a whole. At the European level, office rental growth accelerated by an annualised 2.6 pct. This is the strongest annual rate in over five years. Rental growth in the logistics sector also experienced its strongest annual rate of growth in over a decade of 2.3 pct. Meanwhile, the retail sector across Europe was more subdued, with rents falling by 0.1 pct over the quarter. Nonetheless, it was an improvement on the 0.4 pct fall in Q3 and was just about enough to push annual rental growth into positive territory over 2018,” said Nigel Almond, the head of data analytics at Cushman & Wakefield.

Yields also continued to compress across Europe, with the largest movement remaining in logistics, which was down 20 bps in Q4, driven by the strong investor demand and rental growth. Office yields compressed a further 6 bps, with retail down just 2 bps.

Budapest was the only market of the 46 cities tracked by Cushman & Wakefield to see both positive rental growth and yield compression across all property types in Q4. “Real estate yields continued to move in across Europe throughout 2018, with the strongest downward movement among the three core sectors in logistics – down by nearly 47 bps to an average of 5.71 pct. This trend continued in the CEE region, though at a slower rate. Average industrial yields in the region currently stand at 6.77 pct and are likely to harden further,” said Jakub Budych, senior consultant, capital markets, Cushman & Wakefield Poland

The overall European office yield continued to compress and finished at 4.36 pct. Prime office yields in the CEE region were at 5.26 pct, down by nearly 36 bps on the previous year. “We anticipate further compression of overall office yields across Europe in the medium term, but the downward movement will be slower,” said Jakub Budych.

Over 2018, the overall prime retail yield compressed in Europe by just 7 bps, while retail yields in the CEE region moved in at a slightly faster rate to finish at 5.31 pct.


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