Euro-zone yields stabilise in Q2, but unlikely to have peaked

Recent data show yields stabilised in most euro-zone office and retail markets in 2009Q2. While there are reasons to believe this may be the peak for yields, we are sceptical. Investor demand has picked up, but is still down on 2008 levels. And the small improvement could easily dissipate as economic recovery disappoints. What’s more, property/bond yield spreads could have some way left to climb. We still think, therefore, that the property yield correction has further to run.