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Prime yields under downward pressure across Europe

These features were particularly marked in the office sector, in which nearly half of the monitored locations saw yields fall, and the downward movement in the yield index as a whole was more than twice that recorded in the previous quarter.

This change is all the more notable given that the office market is also the sector experiencing the most significant rental decline, with nearly a third of the locations seeing a drop in prime office rents in the final quarter.

Richard Holberton, Director, EMEA Research, said: "The strengthening in investment appetite for core, prime assets that we saw towards the end of last year is clearly pushing prime yields lower across an increasing number of markets.

"The UK continues to stand out in a European context as the focus of the largest yield movements, but prime office yields are now also under downward pressure in many of the major urban centres including Paris, Frankfurt, Milan and Madrid. Given current investor preferences, it is no coincidence that yields are being driven lower mostly in the large, mature, liquid markets."

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