EUROPE - Take-up of office space in Europe increased marginally in the second quarter despite growing economic uncertainty over austerity measures and concerns surrounding sovereign debt, according to Jones Lang LaSalle (JLL).

Latest quarterly figures for JLL's European Property Clock showed office take-up increase by 2.6m square metres in the second quarter, up 6% on the previous quarter and 34% on Q2 2009.

Furthermore, take-up for the first half of 2010 is now 38% higher than it was for the same period in 2009, with improvements in both western and central and eastern European markets, up by 32% and 73%, respectively.

Prime rental levels stabilised in the majority of locations in the second quarter.

The Office Index, based on the weighted performance of 24 markets, increased by 2.6% on the previous quarter, showing the first positive growth on an annual level (2.3%) since the third quarter of 2008.

The biggest rise in rents was seen in London's West End (13.3%), Paris (7.1%), City of London (5.3%) and Dusseldorf (2.3%).

However, quarterly rental falls were recorded in Dublin (5.3%), Frankfurt (2.9%), Madrid (2.6%), Barcelona (2.4%) and Hamburg (2.2%).

Chris Staveley, head of pan-European office and industrial capital markets, said: "Signs of economic recovery are beginning to feed through into office demand, but occupiers still remain cautious, and we expect annual volumes to be slightly below the five-year average of 11m square metres."

Approximately 1.4m square metres of new stock was added in the second quarter, a 25% increase on the first quarter.

Despite this new stock, tightening supply of quality space is driving rental stability and even growth.

The average European vacancy rate remained stable in Q2 at 10.2%, increasing slightly to 9.8% in Western Europe, but falling substantially in CEE from 16.4% to 14.6%.

This decline was particularly driven by decreases in Moscow and Budapest, while increases were recorded in both Prague and Warsaw.

"Though half of the markets analysed saw vacancy rates increasing, the overall pace is easing, and most markets have reached or passed their peak," Staveley said.

"High vacancy rates of over 15% can still, however, be found in Amsterdam, Dublin, Budapest and Moscow, and there remains a significant spread across Europe, with Paris now showing the lowest vacancy rate at 6.8%."

He said he expected a shortage of new supply in some markets as early as 2011 given the large number of projects postponed during the credit crunch.

"Conversely," he added, "the supply of second-hand space is likely to increase further in some markets during 2010 as occupiers seek to rationalise or even upgrade their space. 

"As a consequence, grade-A supply is likely to continue to decline, but the overall vacancy rate will remain above average until after 2014."
 

Topics