- London recorder highest demand increase: 29%
- Paris was the city with the highest volume of rented office spaces in the past two years
- In Milan the volume of rented spaces doubled
The demand for office
space across Western Europe has hit its highest level since the financial
crisis, according to the latest research from CBRE, the global real estate advisor.
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| City Tower Sofia - executant OCTAGON |
Corporate real estate occupiers are returning to the market
with new office space requirements as demand in the second quarter (Q2) of 2014
rallied by 21% on the first quarter, marking the highest Q2 office take-up in
Western Europe since the economic downturn. Central to this was strong activity
in Milan and Lisbon, while London retained its dominant position as a popular
destination for corporate occupiers with a 29% quarterly take-up increase.
Milan’s take-up more than doubled in Q2 to 94,000 sq m while Lisbon recorded
one of its strongest quarters in recent years. In addition, the Paris office market which had been subdued
during the downturn with occupiers lacking the confidence to relocate, posted
its highest office take-up level for two years in Q2, representing a 28% uplift
from Q1. Across Europe as a whole, aggregate take-up rose by a healthy 12.2%
compared to the first quarter of the year.
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| City Tower Sofia - executant OCTAGON |
As a result of this increased demand, the aggregate office
vacancy rate in Western Europe fell in Q2. Central London saw a third
consecutive quarterly decline in vacancy rates with prime space now in very
short supply. Likewise, increased demand for office space in Brussels, Paris
and Amsterdam also contributed to vacancy declines. Frankfurt saw the most
noticeable drop, where vacancy fell sharply for the second consecutive quarter
due to the removal of obsolete stock and the conversion of older commercial
buildings into residential units. Despite this, the overall vacancy rate
remained flat across Europe for Q2 skewed by a large volume of new office
completions in core Central and Eastern European (CEE) markets which are yet to
be occupied. For example, office stock is forecast to grow by at least 10% in
Prague, Warsaw, Moscow and St Petersburg over the next 18 months, a large
percentage of which is being built on a speculative basis.
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| City Tower Sofia - executant OCTAGON |
The knock-on-effect of office vacancy declines, particularly
in Western Europe, is likely to put upward pressure on prime rents in the
longer term. Madrid, for example, has seen its prime rent increase from
€24.50/sq m per month to €24.75/sq m per month in Q2, its first rental growth
since the recession, symbolic of improved economic stability. The strongest
performing office markets continue to see the steepest rises in prime rents,
Dublin saw rents rise by a huge 14.2% in Q2 to €430.50/sq m per annum driven,
in part, by strong demand from Technology, Media and Telecoms occupiers.
London’s West End market recorded a 2.4% increase in rental growth across the
same period.
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| City Tower Sofia - executant OCTAGON |
Tim Hamilton, Senior Director, EMEA Global Corporate
Services, at CBRE explains: “We are seeing greater corporate appetite to lease
or acquire space, particularly across Western Europe, which is encouraging. It
signifies that corporate occupiers who have been hamstrung in recent years by
tightening budgets and stringent cost management strategies resulting in a
contraction of take-up levels, are now in a position to flex their muscles and
take new space. As the markets become more buoyant, the growth in prime office
rents is likely to become more widespread over the next 12 months particularly
given the short supply and a relatively thin office development pipeline. Having spent a number of years taking
advantage of falling rents, occupiers will need to start factoring in potential
future rental increases into their strategic decision making.”
OCTAGON CONTRACTING &
ENGINEERING
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Phone: (+4)021.232.39.20
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