European prime rents and yields hold steady

Prime rents and yields remained stable in the vast majority of European commercial property markets over the last quarter, despite the continued economic weakness in the Eurozone, according to figures released in Knight Frank’s Summer 2013 European Market Indicators report.

Very few changes were reported in prime rents for European offices over the last three months. As a result, Knight Frank’s weighted average European prime office rent remained virtually unchanged, with only a very minor decline of 0.04% recorded since the Spring 2013 report.

Compared with twelve months ago, the weighted average prime office rent has decreased by a modest 0.3%, with rental falls in Paris, Italy and Spain largely counterbalanced over the last year by small increases in London (West End), Moscow, Germany and the Nordics. However, prime rents now appear to be plateauing in the stronger European markets, while they may have bottomed out in some of the hardest-hit peripheral markets, such as Madrid.

In the investment market, Knight Frank’s weighted average prime office yield remained unchanged compared with the previous quarter, at 5.63%. Prime yields moved outwards moderately in Budapest, but hardened in Dublin. Yields are expected to remain stable in most key European markets over the rest of 2013, supported by robust demand for prime property and the limited availability of stock.

Industrial and retail markets have also remained firm, with few movements in prime rents and yields reported over the last three months in the logistics, retail warehousing and shopping centre sectors.