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LONDON-Prime rents stabilized across Europe in the first quarter, with most markets showing little or no change in any sector, according to CB Richard Ellis. Growth is most evident in office, which in 1Q10 showed its first quarterly increase since the start of the downturn.

Rental growth is being heavily driven by increases in Paris and London and is particularly significant given that the segment registered the largest sector falls in the previous quarter. “Whilst occupier demand is clearly gaining some momentum elsewhere in Europe, this may take longer to translate into significant rental growth,” said CBRE’s Richard Holberton. “Vacancy levels are higher in many of the markets in Europe than in the core Paris and London markets and it will take time to absorb this excess supply.”

The CBRE office rent index for the EU-15 rose by 1.1% in Q1, but showed a year-on-year fall of 4.5%. The largest increase of prime rent in Europe occurred in London, an increase of 9%. Prime rents in retail were effectively unchanged, with the largest falls recorded in Dublin, down 13%, Oporto in Portugal, and London. The two markets with the largest quarterly increase, of 4%, were Berlin and Glasgow. European industrial rents also saw minimal change in the quarter.

Office yields across Europe also fell with 25 of the 55 locations in the survey dropping, 29 remaining unchanged and just one turning higher. Largest yield reductions came in Kiev, down 100 basis points to 14%, and in Oslo, London City and West End, down 50 basis points to 6.25%, 5.50% and 4.25% respectively. The single increase was in Athens, up 25 basis points to 6.50%. Retail and industrial yields fell during the quarter.

Allan Saundersonis a managing editor of Property Investor Europe and a contributor to GlobeSt.com.

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