Emerging Europe: More substantial yield rises ahead

Much like the rest of Europe, shifts in prime rents and yields in CEE were relatively muted in Q1. The lack of movement was mainly due to thin deal evidence and market uncertainty. But looking ahead, given that the worst hit to economic activity from the virus has been in Q2, we think that the slowdown in the occupier market will accelerate. In turn, we expect rents to decline across the board this year, most notably in the retail sector. In terms of yields, except for the Prague-driven rise in retail yields, shifts in core CEE yields have been similar to elsewhere in Europe. But the higher risk attached to CEE markets means that we think yield rises here will be more pronounced than in their Western European neighbours this year.