Low rates supportive of further yield compression

Despite the softness in economic activity, occupier demand generally held up in Q3. And while there are signs that the cyclical slowdown in the euro-zone is starting to hit CEE markets, given their historically low vacancy rates, we think that rents could rise further. What’s more, valuation sentiment improved in a number of CEE markets, meaning yields could be set to fall. Meanwhile, Scandinavia saw another quarter of robust investment activity. And even though all-property yields nudged up in the region, with bond yields set to remain low, we think that they will fall over the next year.