Yield pressures in the property sector continued to steadily mount last month as high demand and very low prime supply impacted. What is more, notwithstanding the recent increase in bond yields, the pressure remains for property yields to fall further in the months to come. In all likelihood this will bring to an end the falls in capital value recorded by IPD over the past 18 months.
Prime yields were unchanged in April at an average of 5.81% across all sectors, a 419 basis point premium to 10-yr government bonds. The trend going forward is also largely stable and with signs of downward pressure being noted, and not just in London, the yield outlook is in fact at its most benign since mid 2010.
The report focuses on the key European office, logistics and high street locations providing a summary of prime rents and yields for the respective cities and markets, while it also gives and an overview of the recent trends in the various regions.
The unfolding crisis in Cyprus produced a more cautious mood in March but sentiment towards prime property has been barely dented let alone derailed. Prime yields were largely stable, averaging 5.8%, and in fact a bi-product of events in Cyprus may be yet more demand for secure, liquid markets such as London and stable income assets such as prime property generally.
Prime yields were stable last month, averaging 5.83% across all sectors. This is a 394bp premium to 10 yr bonds, a fact not lost on investors. Demand has increased since the start of the year and a more serious intent is being seen from some players. Indeed, in the search for stock and yield, more investors are slowly and carefully relaxing their risk controls and activity is increasing as a result, with volumes to-date up 11% on the same time last year thanks to a strong start in the retail market in particular.
The Investment Atlas Summary is an overview of activity in the global commercial real estate investment market in 2012 and an indication of activity in 2013. In addition the report contains a summary of global yield, investment volumes and standard lease term tables
The year has started with a notable improvement in sentiment and this is already filtering down to activity and deals on the ground. The average level of prime yields edged down in January to an average of 5.84% and the outlook improved, with no more markets facing an upward yield shift than are under pressure to fall: the most positive position since July 2011.