Positive Rental Predictions for European Office Markets

Rents are expected to have climbed by 1.4 per cent in core European office markets by the end of this year...

Rents are expected to have climbed by 1.4 per cent in core European office markets by the end of this year. According to research conducted by Savills, the lack of availability of high-quality offices in prime central business district (CBD) locations is the driving force behind the rental increases. There are several cities that will perform significantly better than this average figure, though, with Lyon, London's West End and Dusseldorf predicted to see rental growth of 8.7 per cent, 7.3 per cent and 5.8 per cent respectively.

In addition to the positive outlook for rents, Savills is also confident that vacancy rates will fall slightly in the second half of 2012, compared to the first six months of the year, despite average take-up levels in the continent dropping. Analyst in the company's European research team Julia Maurer commented: "Looking ahead, we expect demand in the second half of 2012 to be stronger than in H1 and anticipate that in some of the core markets, such as Amsterdam, Frankfurt and Brussels, the total 2012 take-up will exceed 2011 levels."

From an investment perspective, CBRE recently noted that office markets in northern Europe attracted the most attention from overseas buyers in the first half of this year. The firm pointed out that the level of cross-regional real estate investment in the continent increased during this six-month period. The largest share of the investment funds went to London, which accounted for just over half, with Paris proving to be another popular destination among non-European investors. Germany and Sweden were cited as two other locations that this group of financiers has been targeting this year.

Jonathan Hull, head of Europe, the Middle East and Africa capital markets at CBRE, said that a marked increase in the volume of capital from non-European sources has been noted in 2012. He added that this rise in activity has resulted in "cross-regional investment [accounting] for more of the European investment market than it has done at any other time since the downturn".

- Monday 15 October 2012

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