It is the only real estate market sector for which Cushman & Wakefield expects rent increases this year.
Europe’s commercial real estate markets continue to be affected by the pandemic, with clear differences between sectors and geographic areas, according to the latest Cushman & Wakefield study for the fourth quarter of 2020.According to the head of Cushman & Wakefield Proprius in Greece, Ms. Niki Sympoura, “the Greek market seems to be part of the most resilient markets in Europe in 2020 with rents and yields of stores and offices remaining within 2019 levels for central stores and modern office buildings and with yields declining rapidly in logistics.The situation is not the same for less central areas and older properties in secondary locations where we saw a rise in yields and a squeeze in rents.The lack of quality real estate in the Greek market and the maintenance of strong interest in real estate investing, supported part of the commercial real estate market, keeping it in satisfactory levels for 2020 ".
The logistics sector continues to benefit from the spending increase on the internet and will see a further increase in rents and a squeeze in yields in 2021.During 2020, the logistics sector was the only real estate category that recorded rent increases and steady yields pressure.
Rents increased by 0.8% in the 4th quarter, pushing annual growth to 1.9% after an average increase of more than 3% in 2019.The United Kingdom (+ 3.5%), Germany ( + 4.7%), France (+ 2.6%) and Benelux (+ 3.5%) recorded the highest increases during the year as a result of a relatively low offer and strong demand.
Continued confidence in the sector and strong demand for leases, led to a further decline in yields by 19 basis points compared to the 4th quarter and stood at 5.05%.The logistics is the only real estate market sector for which Cushman & Wakefield expects rent increases in 2021 and yields squeeze for many markets.
Stores purchases
The retail sector continues to feel the effects of increased online sales and declining traffic.Central rents on major shopping streets in Europe fell by an average of -2.6% compared to the fourth quarter, leading rents to a further decline with the annual growth in the area sinking to -10.6% on an annual basis.This is the lowest recorded yield since the early 1990s, when Cushman & Wakefield began monitoring markets.
A total of 22 out of the 46 markets monitored reported a decline during the quarter with the vast majority (41 markets) reporting a decline during the year.The largest declines (from year to year) were seen in the United Kingdom (-15.3%), the Benelux (-11.1%), Central Europe (-18.1%) and Germany (-13.4%).The average main yield climbed to 4.72%, from 4.3% a year ago.The low demand for offices, with absorption across Europe declining by more than a third in 2020, has left its mark on the office sector.
Office purchases
Office rents across Europe declined further in the 4th quarter of 2020 with the average prime rents falling by -0.5%, recording a lower annual increase on average -0.8%.This was the lowest performance of the rental sector since the second quarter of 2010, when the global financial crisis started. In some key European markets we have seen some resilience during the year with some markets showing positive annual growth, in particular in the United Kingdom (+ 1.3%), Germany (+ 0.6%) and Benelux (+ 0 , 3%).
However, with most markets showing marginal declines in the fourth quarter, the sector is under pressure due to current weak demand.Increasing incentives for tenants are driving net rents in the red for the fourth quarter of 2020.Yields for prime offices are experiencing marginal compression raising the European average to 4.3%, with investors remaining very positive on prime properties in central markets.In addition to a select few markets, Cushman & Wakefield forecast limited further downward pressure on yields.
