DNA of Real Estate: Q1 2019

Nigel Almond

Nigel Almond

Head of Data Analytics

Phone +44 203 296 2328

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dna

The DNA of Real Estate tracks prime rents and yields across 46 key office, logistics and high street destinations within Europe. During the first quarter, there was a modest increase in the number of markets now reporting an increase in yields, providing a clearer sign that we are late in the investment cycle.

Highlights:

  • Fewer markets are reporting compression in yields, with more reporting a rise
  • There is a positive quarter-on-quarter rental growth in office, retail and logistics
  • The rate of rental growth slowing reflecting the mature stage of the property cycle
  • Asset management will be a key driver for delivering stronger returns

Offices

Most core European markets saw limited office growth over the quarter with barely any growth recorded in the UK, France, Benelux and Nordic markets. Germany was the exception where the weighted average prime rental growth in leading cities was up 2.6%, led by a 6.1% rise in Berlin and 2.4% in Frankfurt supported by strong underlying demand. Low vacancy and strong demand continue to support rental growth in Berlin with rents nearly 14.8% higher year-on-year.

High Street Retail

Retail rents once again turned positive, although this was limited to a handful of markets, with Lyon leading the way with Zone A rents 12% higher at €2,800 sqm/pa, where along with other French markets retailer confidence has improved. Italy continues to benefit stronger demand from luxury brands with rents in Rome up 4.2% to €12,500 sqm/pa. Bucharest (+6.4% to €50 sqm/m) was the other main beneficiary supported by limited new supply.

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