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DNA of Real Estate Q1 2023

DNA of Real Estate tracks prime rents and yields in up to 45 cities across Europe, covering the key office, high street and logistics sectors. It provides an overview of quarterly performance for prime rents and yields.


Office rental growth across Europe continued to grow, albeit the rate of increase slipped to +1.6% at the European level, compared with the +2.1% registered in Q4 2022. Just one market registered a fall in rents (Marseille -1.7%). Of the remaining markets tracked 22 reported no change and 23 reporting a rise.

Despite the marginally weaker quarterly growth in Q1, the pace of annual growth rose to 7.1% across Europe on the same period a year ago. This was up from an annualised rate of 6.3% reported in Q4 2022 and a rate of just 2.6% in Q1 2022. This represents the highest annual growth since Q2 2008 (+7.6%). The pace of growth reflects continued demand for best in class space that meets the latest environmental ratings and staff wellbeing alongside rising construction costs. Dusseldorf recorded the strongest growth over the quarter (+8.6%), followed by Malmo (+6.5%), Istanbul (+5.7%) and Prague (+5.6%). Demand.

Prime office yields moved out a further 18bps averaging 4.77% for prime markets tracked in Europe. The outward shift was more modest this quarter compared to the +31bps movement in Q4. Yields are now 81bps higher on a year ago (3.95%) which represented the low point in the most recent cycle. The UK, Germany and Benelux markets have seen the biggest shifts in the last twelve months.


Retail markets continue to face headwinds. The return to growth seen last quarter was short-lived with prime rents falling marginally (-0.1%) at the European level. This was driven by falls in Finland (-4.4%) and the Netherlands (averaging -3.8%). Most markets (32 out of 41) showed no growth over the quarter.

Five markets showed growth in rents over the quarter. Leeds (+4%) reported the strongest growth followed by Geneva (+2.6%) and Vienna (+2.4%).

High street yields continued to edge out, albeit at a smaller rate compared other sectors, just +15bps to 4.56%. This leaves yields up just 41bps compared the same period a year ago. At least half the level of other sectors. France (+25bps), CEE (+28bps) and Germany (+30bps) saw the biggest outward move over the quarter.


The logistics sector continues to benefit from the strongest rental growth, with All European rents up (+2.8%) over the quarter. This is the eleventh quarter in a row that rents have outperformed both high street and offices. Although growth weakened over the quarter, annual growth accelerated to +14.4%.

France (+4.4%) and CEE (+4.0%) along with other peripheral European markets (+6%) saw the strongest growth driven by strong demand and rising construction costs as the supply of new space remains relatively restricted. 41 out of 43 markets saw growth over the year with over two thirds showing double digit growth.

Prime yields moved out by a further 19bps to 5.07% at the European level. This leaves yields 95bps higher than a year ago, which at 4.12% was the lowest in the current cycle. Cee (+40bps) and France (+38bps) saw the biggest rise in yields over the quarter. The UK bucked the trend with prime yields moving in by 5bps to 5.21%. The only market to register inward shift reflecting an inward shift in some northern locations.

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