CBRE: demand for European office space is growing

A market report soon to be published by property advisor CB Richard Ellis shows that occupier demand for office space in Europe continued to grow in the third quarter of 2007. Aggregate leasing for the quarter stood at 2.5 million m2, the third successive quarter in which it topped 2 million. The figure notches up this year’s total to 7.5 million m2, an increase of 10% over 2006.

The EMEA Offices Market View report shows that Germany's strong economy triggered the highest increases in leasing activity, with Frankfurt’s take-up growing at 192% quarter-on-quarter. Dusseldorf and Berlin also saw significant quarterly increases of 100% and 32% respectively. Activity in some of the larger markets such as London and Paris did, however, remain relatively flat.

The company's research underlines that increasing demand and diminishing supply in office availability across Europe has resulted in higher rents. The CB Richard Ellis EU-27 Rent Index rose by 3.1% in the third quarter, raising the rate over last year by 11%. Prime rates rose even faster in other markets, such as Warsaw (65% over 2006), Stockholm (19%) and Helsinki (13%). Senior analyst at Richard Ellis Anna Starczewska said that demand for office space in Europe was on track to reach last year's figure of 10 million m².

The company's EU-15 Index of prime office yields rose marginally in the third quarter to just over 4.8%. Richard Holberton, research and consultancy director at Richard Ellis, commented: 'This is the first actual increase in yields in four years, even though the contribution of yield movements to capital value growth has been diminishing in recent quarters. We remain encouraged as occupier demand levels are still strong and provide significant support to the market at a time when rental rates are not expected to grow as quickly as in recent quarters.'