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London, UK - London remains the most expensive European city to rent prime office, distribution and shopping centre space, according to Knight Frank's latest European Market Indicators bulletin which covers 21 key European cities.
London's prime office rents stand at EURO 1,497 per sq m; with prime distribution rents at EURO 176 per sq m; and retail in Shopping Centres at EURO 5,987 per sq m.
Prime offices
Office leasing markets are now reaching their peak in the current rental cycle with downward pressure expected to be exerted on rents in the coming months in a number of Europe’s major office markets. Vacancy rates have started to increase as new supply has come to the market in a number of locations.
Upward pressure on prime yields is also in evidence, with markets including London, Paris and Madrid having seen corrections of 100bps or more over the course of the last year while outward movements have also been recorded in Eastern Europe.
Prime distribution
The relatively slow rental evolution of the distribution/logistics sector means there is comparatively little movement in rental values. The slowing of investor appetite however is reflected in the outward movement of yields in the sector, with higher prime yields recorded almost across the board.
Prime shopping centres
Rental values have been broadly maintained in Europe’s shopping centres. As is the case in the office sector, there is a concentration of markets at the peak of their cycle. Once again yields have generally moved out in almost all of the cities monitored.
The ongoing correction in pricing has seen yields in some of the continent’s premier markets move to levels only marginally below those currently found in less well-established markets such as the CEE countries. The speed of the re-pricing and comparative value for money offered in the cities which have seen the largest yield corrections, such as London, will increase the attractiveness of such markets to investors – despite the stronger economic performance likely to emanate from Eastern Europe. Further yield correction can be expected across the board as Europe’s investment markets continue to readjust to current financial and economic conditions.
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