Office
Office rents across Europe grew (+0.3%) over the quarter. On an annual basis rents are now just (-0.2%) lower compared to the same period a year ago. With annual rental growth in Q1 21 reported at (-1.2%) evidence of a modest recovery is emerging. More markets registered a quarterly increase, notably across France, Germany, Benelux and the Nordics. With improved occupational markets, prime office yields compressed a further 4bps to 4.21%, lower than the 4.23% recorded in Q1 2020, just before the pandemic started to bite. Further, albeit modest, compression in yields is expected over the remainder of 2021.
Retail
Highs street shops have been hit hard by the pandemic, the reduction in tourism and rising online sales. There are signs that the negativity is starting to ease. Primes rents were just (-0.2%) lower (quarter-on-quarter) versus a drop of (-1.5%) in Q1. On an annual basis rents were (-7.2%) lower compared to double-digit falls in the two previous quarters. Close to 90% of markets monitored reported no change in rents in Q2. Prime yields were flat at 4.38%. They are 10bps higher from a year ago and nearly 40bps higher since Q2 2019.
Logistics
Rental growth and yield compression has accelerated across the logistics sector. On average prime rents across Europe were up (+1.1%) during the quarter, pushing annual growth to (+4.1%), its highest rate of growth since the early noughties. The strongest growth over the quarter was recorded in the UK, Germany and CEE markets. The average prime yield is now 4.73%, its lowest on record. Twelve markets now report sub-4% yields on logistics assets, compared to no markets two years ago. Notably across France and Germany.
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.
