Office vacancy rates in Europe are likely to remain lower than pre-recession levels, despite improving development activity across the region, according to a new report from Cushman & Wakefield 'Global Office Forecast: Is the World Overbuilding?'
Berlin and Munich are expected to have the second- and third-lowest vacancy rates in the world by 2019, at 3.1% and 3.3% respectively, the study found.
However, the number of development completions is expected to increase significantly in Istanbul, London, Brussels, Vienna and Dublin over the next three years. During 2017-18, Istanbul, Copenhagen and the City of London will see the highest level of completions so far this cycle.
'Some key European office markets, such as Paris, London and Brussels, are expected to hit a cyclical high in terms of new construction over the next two years, but vacancy rates are still expected to remain lower than pre-recession levels,' said Elisabeth Troni, head of EMEA research & insight, Cushman & Wakefield.
Two-speed development
The report said that the global construction boom is being led by Asia Pacific, where 60% of projects are rising. The Americas region is also in the midst of a robust development cycle, likely to peak this year.
'The development pipeline is also ramping up throughout Europe, but not nearly to the same degree as the other regions,' added Troni.
Indeed, in some European markets, such as Stockholm, Amsterdam and Helsinki, less than 2.5% of stock is likely to be completed over the short term, offering stronger potential rental growth and lower vacancy.
Budapest, Dublin, Copenhagen and Madrid are expected to have the strongest growth rates in the office-reliant information and communications sectors.
Meanwhile, Brexit-related uncertainty is expected to inhibit office-based job growth, but vacancy in London is still expected to remain tight. The UK capital ranked 7th on the vacancy forecast for 2019, with only 4.8% vacancy.
London is 8th on the list for new build completions 2017-19, at 19.9 million ft2 (1.8 million m2). According to the report, that makes the city the most active development location in Europe, and almost double Paris, Brussels and Berlin which are ranked 20, 21 and 22.
