Prime office yields have stabilised in over half of the markets, but they are 4% or lower in almost all markets covered in this report, with the exception of Lisbon (4.25%), Warsaw (4.5%), Manchester (4.75%), Athens (6.25%) and Bucharest (7.15%). This is another factor that justifies the rise of investment volumes in some of these locations, as investors are seeking higher returns. The average prime yield for CBD offices stands at 3.7%, which is 12bps down compared to last year and 6bps down on last quarter.

The prime CBD and non- CBD office yield gap continued narrowing to 86bps, from 96bps in Q2 2018. This is reflecting the tight supply situation in CBD markets and the growing investors’ appetite for prime properties located in peripheral areas well-served by public transport.

We forecast prime office CBD yields to move in by more than 5bps over the next 12 months in Belgium, Czech Republic, France, Greece, Luxembourg, Romania, and Sweden supported by resilient investor interest.

Athens, Warsaw, Lisbon and Bucharest are the only markets where shopping centre yields moved in by 25bps YoY. In all other markets, shopping centre yields remained stable or softened by 10-25bps and by up to 50bps in London and 75 bps in Paris, following the structural changes in the sector. Some softening of yields in the retail sector is forecast in Belgium, Czech Republic, Ireland, Norway, Portugal, Spain, and UK markets. Romania is the only market forecasting any inward movement of yields in the retail sector in the next 12 months as a mismatch between buyers and sellers expectations continues.

On the contrary, logistics yields are compressing fast across markets, an average of -47bps YoY this quarter, pricing in positive sector outlook. Looking forward over the next 12 months, further industrial yield compression is expected across Czech Republic, France, Germany, Greece, Poland, Portugal, Romania, Spain and Sweden. In all other markets, industrial yields are forecast to remain stable.

_{Read the articles within Spotlight: European Investment 2019 below.}