- Number of markets reporting yield compression doubles in Q4, driven by logistics
- Offices post the strongest rental growth on a quarterly and annual basis
New data from Cushman & Wakefield reveals that a growing number of European commercial real estate markets saw prime yields move inwards in Q4 2024, with 24 market sectors reporting an inward shift in Q4 2024, double the number in Q3, providing a clearer signal that Europe’s investment markets are on the road to recovery at the prime end of the market.
Cushman & Wakefield’s latest DNA of Real Estate, which focuses on Europe’s prime markets, highlights that logistics led the field, with 11 markets reporting an inward shift in prime yields quarter on quarter (q-o-q), followed by offices (eight markets) and high street retail (five).
Southern and Central European markets saw the most significant inward movements. Office yields in Southern European markets moved in 10bps, largely driven by strong performance in Spain. Logistics and high street retail in Southern Europe also saw inward shifts of -8bps and -5bps, respectively, due to robust economic fundamentals supporting greater optimism and improved pricing levels in Spain and Portugal.
Central European markets experienced modest but cross-sector compression in office (-5bps), high street retail (-5bps), and logistics (-4bps) sectors. In the Nordics, Sweden and Norway saw compression in the office sector (-6bps).
At the All-Europe level, offices and logistics reported inward shifts q-o-q of 3bps to 5.47% and 5.27%, respectively, in Q4 2024. High street retail yields moved in a more modest 1bp to 4.86%. Year on year (y-o-y), only logistics and high street retail saw yields drop, by 2bps, while offices saw an overall outward shift of 8bps.
Nigel Almond, Head of Data Analytics, EMEA Research, at Cushman & Wakefield, said: "The significant inward shift in prime yields across a growing number of European commercial real estate markets in Q4 2024 underscores the robust demand and investor confidence in the sector. Logistics continues to lead the way, reflecting the sector's critical role in the modern economy, while the strong rental growth in offices highlights the ongoing demand for high-quality, well-located assets. This trend is particularly evident in Southern and Central Europe, where economic fundamentals are driving optimism and improved pricing levels. We anticipate these positive dynamics to persist in 2025, further bolstering the resilience and attractiveness of the European commercial real estate market."
Prime rental growth on the high street reached 3.5% per annum in Q4, more than double the 1.5% registered a year ago, supported by strong performance in prestigious shopping streets like Milan’s Via Montenapoleone, London’s Bond Street, and Avenue des Champs-Élysées in Paris – as highlighted in Cushman & Wakefield’s latest Main Streets Across the World report.
Strong rental growth and some mild yield compression towards the end of the year ensured prime office values ended the year 4.4% above their 2023 levels, supported by a near 8% rise in Southern Europe. Despite the outward year-on-year shift, strong rental growth ensured office values grew the most in 2024 ahead of high street retail (3.9%) and logistics (3.8%), which benefitted some yield compression, but lower levels of rental appreciation.
