Office
On average, prime rents rose by a further 0.5% over the quarter, following an increase of 0.3% in Q2 and 0.1% in Q1. This pushed annual growth back into positive territory for the first time since the pandemic started to bite in Q2 2020, with rents now 0.3% higher year-on-year. Positively, no markets registered a fall in rents over the quarter. yields continue to compress, albeit at a modest pace, with the European prime yield averaging a 3bp reduction over the quarter to a new record low of 4.16%. Excluding the UK, prime office yields now average 3.94%, having fallen below the 4% mark in Q2 2021.
Retail
Retail remains in the doldrums as rents continue to fall, down 1.1% over the quarter and by 6.1% year-on-year. A total of twelve out of 42 markets reported falling rents in the third quarter. Although the outlook remains uncertain there are some signs of optimism. Compared to previous quarters we do see a reduction in the number of prime markets expecting a fall in rents over the next twelve months. high street yields stabilised over the quarter, averaging 4.35%. Modest compression in some markets was offset by flat or a marginal rise in yields elsewhere in Europe.
Logistics
Prime European logistics rents grew on average by 5.2% over the past twelve months, their fastest year-on-year rate in over two decades. The increase reflects the continued demand for best in class space in the top locations as demand outstrips a reducing supply of prime buildings in many markets. Yields fell 16bps over the quarter to 4.56%. Yields are now 68 bps lower over the year, the strongest over recent years, though still short of the record 112 bps reduction in 2006. The gap between logistics yields and other use types narrowed to their lowest level on record.
Notes:
DNA of Real Estate tracks prime rents and yields in 46 cities across Europe.
Nordics covers markets in Denmark, Finland, Norway and Sweden. Benelux covers Belgium, Luxembourg and the Netherlands. Semi-core covers markets in Ireland, Italy, Portugal and Spain. CEE covers markets in the Czech Republic, Hungary, Poland, Romania and Slovakia.
