According to international real estate advisor Savills, the average yield gap between prime and secondary European office property now stands at 100 basis points.
According to international real estate advisor Savills, the average yield gap between prime and secondary European office property now stands at 100 basis points. This compares to levels recorded ten years ago.
Savills survey finds the yield gap between prime and secondary office stock was at 60 basis points during the peak of the investment market activity in 2007 and 2008. However, over the past year, average prime yields have compressed by 38 basis points to below 5.9%, meanwhile secondary yields have compressed by 31 basis points and now stand at an average of 7%.
Giles Wilcox, head of cross border investment, says: “This yield divergence reflects investor preference for prime assets. We have seen the strongest movements in London and Paris but as some investors get priced out of these markets, we forecast the next wave of significant yield compression will occur in German office stock which is seeing increased investor focus.”
The strongest inward yield shifts for prime CBD assets ranged between 25 and 175 basis points with the highest shifts in London, Manchester and Paris. In terms of secondary yields French and British markets saw a 100-125 basis point downward shift, meanwhile in some Southern European markets such as Athens, Milan Bucharest and Budapest yields continue to soften.
Savills survey records yield movement across 32 centres in Europe.
For further information, please contact:
Giles Wilcox, Savills
+44 (0) 20 7409 8864
Victoria Cambridge, Savills Press Office
+44 (0) 20 7409 8940