The sector’s strong rental growth is supported by continued positive performance across German, Nordic and semi-core markets such as Ireland, Italy, Portugal and Spain, which pushed weighted growth across Europe to 0.8% quarter-on-quarter.

This was more than the logistics sector (0.4% q-o-q) and high street retail which returned to growth with a modest 0.2% q-o-q.
 
Yield movements were more modest in the first quarter with both retail high street and logistics moving in 5 basis points (bps) to 4.15% and 6.1% respectively. Office yields tightened by a modest 1bp to 4.46%. This means that European prime weighted yields for both offices and logistics are now at their lowest on record.
 
Offices
Office rents grew by 0.8% in Europe, the highest quarterly growth rate in the past six years. The last four quarters have seen positive growth in at least 15 out of the 47 monitored office markets, providing clear signs of positive momentum in leasing markets. Growth this quarter was led by Milan at 5.6% quarter-on-quarter, supported by strong demand, especially in central locations.

Prime rents in Berlin grew by 5.2% q-o-q and by 16.2% y-o-y while both Dusseldorf (3.7%) and Munich (1.4%) also registered continued rental growth.
 
Following six quarters of falling rents, the UK registered a modest 0.1% q-o-q growth at a national level, although with rents still negative on an annual basis it is evident that a lack of clear direction on Brexit talks is delaying investment and occupier decisions.
 
Logistics & high street retail
Rents were flat in the majority (39 out of the 45 monitored) of logistics markets in the first quarter of 2018 while high street retail rents across Europe grew by a modest 0.2% over the quarter.