European property values were up for the fifth consecutive quarter in Q3, with a 0.6% rise, according to Altus Group’s Pan-European Valuation Dataset report.

Yields remained relatively stable over the quarter, with the increase in value primarily driven by improving cashflow fundamentals, a metric that increased slightly over Q2.

Over the past 12 months, values have risen by 2.9%, the report reveals. Most of this gain is attributed to cashflow improvements, adding 2.6% to values.

The remaining 0.4% comes from the positive yield impact, reflecting a steady improvement in investor sentiment, aided by the shift to lower interest rates.

Values rose across all property types, with the ‘other’ category leading the way with a 1.2% rise, bolstered by hotels.

Retail climbed the rankings during the quarter with values rising 0.6% to now match the overall average. Office and industrial trailed slightly, both registering below-average increases of 0.5%.

Phil Tily, senior vice-president, head of performance analytics, at Altus, said: “Retail and office have been more muted, with retail at the bottom end of the order, reflecting the sector’s comparatively weaker cashflow contributions.”

Offices is the only sector to come in below the overall benchmark on a three-year basis, which Tily said highlighted the “structural challenges faced by this market segment, which has endured the largest adjustment in yields alongside a comparatively low cashflow recovery”.

Meanwhile, residential maintained an above-average position in Q3, boosted by both a positive cashflow impact and a reduction in yields. The pace of improvement has eased, as the cashflow aspect has slackened off with the increase in market rent slowing from 2.1% in Q1 to just 0.4% in Q3.

Residential has also been a lead performer on an annual basis, followed by the industrial sector.

The industrial sector retains its attraction from an investor sentiment standpoint, with yields continuing to have a positive impact on values, according to the report.

The cashflow aspect of appreciation, however, dropped to 0.4%, the lowest level across the main sectors, as industrial market rents rose by just 0.1% in Q3. Value growth slowed in both the Netherlands and the UK, while Germany recorded a decline in Q3.