Press Release

10 May 2019

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Yield compression decelerates in European commercial real estate markets with weaker rental growth forecast

London, 10 May 2019 – The pace of yield compression decelerated across Europe’s commercial real estate markets in the first quarter of 2019, according to Cushman & Wakefield’s latest DNA of Real Estate report.

During the first quarter, the (see full report here Dna Real Estate Q1 2019 Final) showed 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. A total of seven city sectors reported an increase in yields this quarter, compared to just five in Q4, with far fewer markets reporting a fall – 16 in Q1 versus 44 in Q4. Most increases in Q1 were in the retail sector where the average prime European retail yield rose 2bps to 4.20%.

Yields in both offices and logistics continued to compress, albeit at a weaker pace compared to previous quarters on both a quarterly and annual basis. Office yields shrank 1bp to 4.35% (14bps lower year-on-year) with logistics yields just 4bps lower at 5.68% - this compared a 20bp fall in Q4, though remain 42bps lower year-on-year. This fall underscores the continued demand for logistics assets with investors competing for the best assets.

Nigel Almond, Head of Data Analytics at Cushman & Wakefield, commented: “Yield compression over the quarter was mainly limited to the office and logistics sectors and predominantly across semi-core markets - notably Italy and Spain and CEE markets such as Czech Republic and Poland.

“Few markets registered an increase in yields. Moscow saw both retail and office yields rise 25bps, partly driven by a rise in the Central Banks key rate at the end of last year, but also on the back of weaker investment demand and the devaluation of the Ruble.”

Whilst investment markets appear to be late cycle, we continue to see positive developments in leasing market conditions with average prime European rents increasing on a quarterly basis across all property types – led by offices at 0.7%, and logistics (0.5%) and retail (0.3%). Growth remained positive for both offices (+3%) and logistics (+2.6%) on annual basis, although retail rents continued to slip (-0.4%) year on year.

In the office sector, most core European markets saw limited 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.

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.

Almond concluded: “The outlook for rents remains broadly positive, albeit the rate of growth is expected to slow with fewer markets now expecting rents to be higher by year end compared to the position in Q4. High rents are expected to curtail demand in many of the best locations reflecting the mature stage of the property market cycle, although we do expect to see healthier growth in more supply constrained markets.

“The impact of ecommerce continues to be reflected by a downgrade to retail rental growth in Europe. With rental appreciation factored into pricing across most sectors we see limited yield compression moving forward with asset management a key driver for delivering stronger returns.”


Notes to Editors:

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 Bratislava, the Czech Republic, Hungary, Poland and Romania.

About Cushman & Wakefield Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit or follow @CushWake on Twitter.

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