European Prime Commercial Rents and Yields Hold Firm in Face of Weak Economic Picture

Despite a worsening short-term economic outlook for much of Europe, prime rents and yields for the region’s commercial property remained broadly stable in the second quarter (Q2) of 2012, according to new figures released by CBRE.

Continuing the pattern of the past few quarters, prime yields rose slightly across all three main property sectors, reflecting a degree of investor caution and low transaction activity . However, the changes in yields remain moderate: over the past year, office and industrial yields for the EU-15 area are just 12 basis points higher. Prime retail yields, despite increasing for the first time in twelve months in Q2, are still five basis points lower than this time last year.

Yields for prime assets rose in only 21 out of 145 markets CBRE monitors - mostly in southern European markets such as Italy and Spain where investor demand is weakest as well as in a number of regional UK cities, during the quarter.

Prime rents saw little change in the office and industrial markets in Q2, but there was some upward movement in the retail sector, reflected in a 2.3% increase in the CBRE EU-15 Prime Rent Index. Of the 19 locations where rents rose in Q2, ten were retail markets. While there was no strong geographic pattern to this quarter’s rent movements, office and retail rents did rise in a number of the German cities.

Richard Holberton, Director of EMEA Research at CBRE, said:

“With leasing and investment activity both prone to the effects of fragile sentiment, adjustments in prime rents and yields remain very gradual. In part, the apparent stability reflects a limited flow of transactional evidence, but the pattern of yield changes also increasingly reflects investor aversion toward markets most at risk from the Eurozone debt crisis. Rents remain more affected by local dynamics, with the rise in prime retail rents strongly linked to retailers’ precise focus on the best locations.”


Office yields across Europe rose marginally during Q2 2012. The CBRE Prime Office Yield Index for the EU-15 increased by six basis points in the quarter, and is now 12 basis points above the level of the same quarter last year. Eight of the 54 markets surveyed saw downward yield movements this quarter, 36 remained unchanged, and ten saw an increase. The largest decreases were of 25 basis points in several markets including Dublin, Stockholm and Geneva. The largest increases (50 basis points) occurred in Milan and Lisbon, which rose to 6% and 8%, respectively.

Retail yields edged up for the first time in Q2 2012, with the CBRE EU-15 Prime Retail Yield Index rising by two basis points to 4.92%. Only two markets contributed to this rise, Milan and Rome, both up by 25 basis points to 5.5% and 5.75% respectively. Six markets saw yields move lower and 40 remained unchanged. The largest yield reductions (25 basis points) were recorded in Dublin, Barcelona and Stockholm.

Industrial yields edged slightly higher over Q2 2012, with the CBRE Prime Industrial Yield Index for the EU-15 rising by four basis points to 7.67%. This yield is 12 basis points higher than the same quarter last year. Five of the 43 markets surveyed saw downward yield movements this quarter, 29 remained unchanged, and nine saw an increase. The largest decrease was recorded in Dubai, where yields fell by 25 basis points to 12.00%. The largest increase was in Lisbon, up 50 basis points to 9.25%.


Prime office rents across Europe remained stable during Q2 2012. The CBRE Prime Office Rent Index for the EU-15 showed only a slight year-on-year gain of 0.25%. Five of the 54 markets in the survey saw increases in prime rent, 42 remained unchanged, and seven fell. The largest increase occurred in Gothenburg, Sweden where prime rents rose by over 4%. The largest rental decline was in Tel Aviv, down 7.7% in the quarter.

Prime rents in the retail sector increased in Q2 2012 with the CBRE Prime Retail Rent index for the EU-15 rising by 2.3% in the quarter, and 4.0% over the year. Ten of the 48 markets surveyed registered an increase, 35 remained unchanged, and three fell. Paris and the City of London both saw increases of over 10%, while the largest fall was recorded in Dublin (down 10%).

European industrial rents were down slightly in Q2 2012. The CBRE Industrial Rent Index for the EU-15 fell by around 0.5% in Q2, and is down by just over 1% for the year. Four of the 43 markets in the survey showed an increase, four fell and 35 remained stable. The largest fall was in Lisbon (down 7% to €39 per sq m per annum). Increases were more moderate, with Moscow posting the largest increase, at 3.7%.

Note to editors: Analysis based on quarterly monitoring of prime markets across EU-15 countries, comprising 54 office markets, 48 retail markets and 43 industrial markets.

Published on: 17 07 2012