For the survey as a whole, more locations recorded rental increases than declines, and more saw a drop in yields than an increase. Improvements were most evident in locations with stronger economic fundamentals, or those that are proving most attractive to real estate investors. By contrast, many of the weaker signals were concentrated in southern Europe, smaller CEE markets and regional UK.
At aggregate level, yield movements in Q4 2012 were moderate – as has been the case for some time now – but the direction of movement was notable. The office yield for the EU-15 dropped by four basis points following four consecutive quarters of increase, while the retail yield fell by five basis points after a small rise in Q3. Yields for industrial property were effectively unchanged. Yield improvements were highly concentrated in markets that attracted increased investor interest in Q4, notably Germany, but also France and Ireland. Conversely, Spain, Portugal and several regional UK markets were the focus of yield increases over the quarter.
Economic uncertainty is restricting user demand and, as a result, office and industrial rents were virtually unchanged during the quarter. Where rents did rise in these sectors, it was mainly in Germany and the Nordics. The prime retail market is the main area of rental momentum and a 2.1% rise in Q4 took the year-on-year growth rate to 5.0%, its highest level since 2008. Increases in both London and Paris contributed strongly to this rise.
Richard Holberton, Director of EMEA Research at CBRE, said: "Occupier market activity and rental movements remain constrained by the expectation that 2013 will be a year of faltering economic recovery. The prime end of the retail market is showing stronger rental momentum as retailers remain very discerning over location selection for store network expansion. Investor interest is still predominantly focused on the prime end of the market and the evidence of the final quarter of the year is that this is driving pricing changes in some of the larger and more popular investment markets such as Germany and France.”
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