International real estate advisor Savills latest market in minutes states that prime yields have hit new lows in many markets, pushed down by competition for the best assets and the potential for further yield compression allowed by low bond yields and interest rates. The firm finds the average prime CBD offices for the area surveyed* in May 2015 was 4.83%, down 7bps from Q1 2015.
International real estate advisor Savills latest market in minutes states that prime yields have hit new lows in many markets, pushed down by competition for the best assets and the potential for further yield compression allowed by low bond yields and interest rates. The firm finds the average prime CBD offices for the area surveyed* in May 2015 was 4.83%, down 7bps from Q1 2015.
Marcus Lemli, head of European investment at Savills, comments: “The weight of money is increasing with new investors entering the European arena, which is leading to further yield compression across markets. As investors focus is broadening, activity levels are rising in core markets and peripheral markets as well as in higher yielding segments.”
Savills reports that the average prime achievable regional shopping centre yield moved in from 5.34% in Q1 to 5.25% in May. The shopping centre market has and should continue to benefit from the competitive conditions in offices and potential sellers could benefit from strong buyer interest. The logistics sector, which is traditionally the highest yielding sector, has also seen average prime yields move in from 7.1% in Q1 2015 to 6.9% in May.
According to data from RCA the second quarter of the year is on track to match or even exceed Q1 2015 with €29.7 billion transactions to date and another €16.3 billion in the pipeline. Savills predicts total investment for 2015 will exceed last year’s volume of €210bn.
Savills finds that the share of international investors continues to rise in Europe, with US, Canadian and Middle Eastern investors currently the most active, accounting for 45%. UK, French, German and Swedish investors also continue to look for opportunities in Europe. The firm reports that London, Paris, and the big German cities of Berlin, Munich and Frankfurt are still amongst the top destinations for investors, but the peripheral markets of Dublin, Madrid and Milan also have an established place in the top investment destinations.
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Editors note
*The area surveyed included Vienna, Brussels, Helsinki, Paris, Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich, Athens, Dublin, Milan, Amsterdam, Oslo, Warsaw, Belgrade, Madrid, Stockholm, London.