The office sector in Europe is being negatively impacted by the ongoing uncertainty surrounding the eurozone crisis. New research published by Knight Frank revealed average prime office rents in the continent fell by 0.5 per cent in the second quarter of this year - the first decline recorded in this sector in more than two years. Among the cities to see the biggest falls were Brussels and Barcelona, posting drops of 6.8 per cent and 5.9 per cent respectively.
Senior international research analyst at Knight Frank Matthew Colbourne suggested European office markets could be "reaching a tipping point" where occupier sentiment shifts more firmly into negative territory and the uncertainty has a detrimental impact on a wider range of locations. So far, it appears offices have taken the biggest hit, with rents for shopping centres and logistics units remaining broadly stable across the continent. However, the downward spiral in some continental markets can provide a boost to others, with Andrew Sim, head of European investment at Knight Frank, stating: "There remains a strong appetite for prime property in the most stable and liquid cities, coming from super high net worth individuals, as well as sovereign wealth funds and institutions from the Middle East and Asia."
Mr Sim concluded it is secondary markets that are suffering the most, as the uncertainty surrounding a solution to the eurozone problems has resulted in a slump in investor confidence, thereby reducing the volume of transactions completed in commercial real estate markets. His comments echo those made recently by Matt Oakley, director of commercial research at Savills, who stressed there is no indication that demand for prime London commercial property investments is waning. "Arguably, you would say that as the turbulence in the eurozone has picked up over the last few months, we have seen more interest in the safe haven end of the London market," he asserted.
- Thursday 12 July 2012