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News Release

London

Slowing Office Yield Decompression across Europe Hints at Improving Sentiment?

Jones Lang LaSalle Issues Q1 2009 European Office Yields Report


The weighted average European prime office yield moved out 20bps from 5.8% at the end of 2008 to 6.0%, a much smaller increase than the 50bps movement between Q3 and Q4 2008, according to Jones Lang LaSalle’s Q1 2009 European Office Yields Report. The yield range across Europe continued to widen both between core and emerging markets and within core markets.

Jones Lang LaSalle believes that some markets, typically core markets which have already seen large price corrections, are now within touching distance of their prime yield ceilings in the current cycle, and expects many of those markets to reach that point by the end of the year, including London and Paris; yields could even move in marginally in some cases.

Looking ahead, Tony Horrell, Head of European Capital Markets at Jones Lang LaSalle said: “This view that some markets are close to their prime yield ceilings is largely based on improving buyer sentiment for the best quality product, where investors believe yields have reached a level where they feel confident to transact. It also represents investors seeking to secure the very best assets before the bottom of the market on the assumption that the best assets are typically traded before markets begin to pick up again.”
Petra Blazkova, Associate Director, European Research at
 
Jones Lang LaSalle commented: “In core western Europe we are now starting to see early signs of prime office yields stabilising in some markets as sentiment has begun to improve. Across the region the pace of outward yield movement slowed in Q1 2009 and in many markets yields stood still over the period (25 markets out of a survey total of 44 saw stable yields over the quarter) although this was typically on the back of large corrections towards the end of 2008 and in some cases is sentiment based because of thin trading.”

German and Italian markets have continued to show the smallest outward yield movements since the start of the market decline moving by around 50-60bps on the year; all German markets remained stable over the quarter