Abstract:
This paper examines the drivers of prime office yields in Europe.
Specifically, the paper uses 16 European cities across 8 European
countries including United Kingdom, France, Germany, Italy, Spain,
Belgium, Netherlands, and Ireland from Q1 2007 to Q2 2024. The
premier cities include Berlin, Paris, Central London, Frankfurt, and
Munich while the primary cities are Hamburg, Dusseldorf, Madrid,
Milan, Amsterdam and Dublin. Lastly, the secondary cities comprised
of Barcelona, Rome, Brussels, Cologne, and Lyon. For the estimation
technique, we use quantile regression and OLS while accounting for
country, city and time fixed effects. From the baseline results, we
find that take-up, prime rent, vacancy rate and foreign investment
have a negative and statistically significant effect on office prime
yields. In the case of the results obtained from the quantile regression,
vacancy rate is seen as the most significant determinant of
office yields. Prime rent emerged as a significant determinant of
office yields. The result of this work is particularly useful for investors,
policy makers and analysts as it provides an in-depth understanding
of how office yield varies over time in different European
Cities as well as the factors which influence office yields.
