DTZ: CEE letting market remains immune to sub-prime fallout

Growth in Germany and some Central and Eastern European (CEE) markets, particularly Moscow, shows no sign of letting up despite the credit crunch, according to DTZ's new European Leasing Markets report. 'While some occupier markets have been hard hit, others have yet to register any major impact from the global credit crisis with occupiers continuing to expand their operations,' said Paul Sanderson, head of EMEA Research at DTZ.

Europe's largest economy, Germany, entered 2008 on a high note with total take-up in the top five markets - Berlin, Düsseldorf, Frankfurt, Hamburg and Munich - reaching around 1.3 million m² in the first six months of the year. CEE occupier markets have also so far remained immune to the sub-prime fallout with leasing activity continuing to gather pace, especially in Moscow, where 800,000 m² of space was let in the first half of the year. Strong demand and limited vacancy has filtered through to rapidly rising rents which grew by a massive 106% in the year ending March 2008. Moscow now records the second highest prime rental level in Europe after London's West End, at almost EUR111 per m² per month.

The outlook for European occupier markets remains sensitive to potential repercussions from the US slowdown. However the wider European economy remains largely resilient to the global slowdown with a few exceptions, such as the UK, Ireland and Spain.

Wth the lack of quality office space available in western CBD's combined with the need to cut costs, many occupiers will need to rethink their locational and space requirements, both at a city and country level, the DTZ research shows. In fact re-locations have emerged as a central trend in many European markets. With low availability and high rents in many CBDs, occupiers are increasingly looking towards alternative locations such as La Défense and the Western Crescent in Paris and the City in London as opposed to the West End.