The DNA of Real Estate: Q1 2019 [REPORT]

• Więcej rynków odnotowuje wzrosty niż kompresję stóp kapitalizacji
• W ujęciu kwartalnym czynsze wzrosły w sektorze nieruchomości biurowych, handlowych i logistycznych
• Tempo wzrostu czynszów spowalnia, co świadczy o dojrzałej fazie cyklu na rynku nieruchomości
• Asset management a key driver for delivering stronger returns

During the first quarter, the report 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%.

„The CEE Region continues to record modest rental growth, in particular at net effective level in selective regions for offices and logistics. The yield compression for offices and logistics across key markets in Europe is replicated in CEE which even bucks the trend in regard to Retail with expected compression to continue for the very best schemes” - Soren Rodian Olsen, Head of Capital Markets Poland, Cushman & Wakefield, comments.

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.

ield 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 - Nigel Almond, Head of Data Analytics at Cushman & Wakefield, commented.

As he added, "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".

Positive developments in leasing market conditions

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.

Jak konkluduje Almond, "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”.