Friday 13 December 2019

Office yields fall as market gains ground

Peter Flanagan

DUBLIN office yields plunged in the first three months of the year, as investors continued to snap up top-level buildings and rental demand continued to exceed supply.

Research from CBRE shows office yields in Dublin fell 50 basis points in the first quarter of the year. That was the second biggest drop in Europe, Middle East and Africa, exceeded only by office yields in Helsinki.

Dublin industrial yields also featured in the top 20 falling yields across EMEA. Industrial yields in the capital dipped 25bps.

Office rents in Dublin now stand at around €377 per square metre (€35 per sq ft). That was little changed on the start of the year, but it is about 22pc higher than this time last year, and about 27pc higher than in 2010.

Yields for prime offices now stand at 5.25pc, a drop of 1.25pc since the crash.

On the retail side, it is a slightly less optimistic story. Prime zone A rents came in at €1,880 per square foot, a drop of 11pc year-on-year. But yields still fell 25bps to 5.25pc.

On the industrial market, meanwhile, rents were unchanged at €60 per square metre in Dublin.

While Dublin was one of the biggest movers on the market, it followed a wider trend across the region that saw yields compressing as rents rose.

"The findings of our survey support the story of a rebound in investment activity reported across Europe in the past six months," said CBRE.

"It reflects a growing investor appetite for commercial real estate in a strengthening economic environment."

The agent's EMEA prime yield Indices continued to edge down, by between 5 and 8 bps. The largest yield decrease was recorded in the office sector, which fell by 8bps, leaving the index 24bps lower than a year ago.

There was yield compression in some of the markets most affected by the eurozone crisis, including Dublin and Lisbon, while yields in Madrid, Barcelona and Athens fell sharply as well.

CBRE's senior director for EMEA research Richard Holberton said: "Demand for European commercial property continues apace in 2014 reflected by the tightening of prime yields across all sectors in the first quarter.

"The drop in yields in Q1 2014 has been particularly pronounced in markets closely linked with the eurozone crisis including, Spain, Ireland, Portugal and Greece.

"While no one is yet heralding the arrival of widespread economic recovery in the region, confidence is growing, with opportunistic overseas investors increasingly prepared to look beyond safe haven markets and consider opportunities in places that were out of favour as recently as 12 months ago."

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