Larger hit to values yet to come

Prime euro-zone rents and yields held broadly steady in Q1, with many agents noting it was not possible to provide a robust reassessment of values. This marked the end of period of positive rental growth and yield declines in many markets. Indeed, there were already signs that occupier demand slowed, even though lockdowns were not fully in place until the end of March in many countries. With economic activity at its lowest in Q2, we think that a more substantial deterioration in rents and increase in yields is on the way. Although lockdowns are being loosened, the recovery is expected to be slow and uncertainty will remain elevated, which we think will prevent property values from bouncing back quickly.