European office occupancy rates have largely returned to pre-pandemic levels of 65% on average across Europe, with vacancy sitting at a steady 8.1%, according to new research from Colliers.
However, average figures mask the varying performance within countries, the global insights & outlook office report showed. Tech-heavy Dublin's vacancy rate has risen from 10.6% to 13%, while London City has reached 11.4% from 9.7%.
The standout strong performing locations so far in Q2 were London’s West End, which held steady with a vacancy rate of 6.8%, while Amsterdam saw a drop in vacancy to 6.1% from 6.5%, and Brussels recorded a fall in vacancy to 7.7% from 8.3%.
Other strong locations were Paris where vacancy rose by only 0.6% to 8% and Berlin, which saw rates creep from 3.1% to 3.7%.
Colliers’ report finds that varying return to office approaches post-Covid, approaches towards ESG-compliance differences and how markets have reacted to shifts in inflation and interest rates have created significant divergence in office investment volumes, pricing, and appetite globally.
The underlying fundamentals of city functionality are also making a difference, the report said.
'The pricing of office assets is moving in sync with key macro factors such as inflation and interest rates, globally. It is also adjusting to market fundamentals where there is a huge divergence in the factors at play,' said Damian Harrington, head of Global and EMEA capital markets research for Colliers. 'Within each region, there is also great diversity in performance and fundamentals across local markets.'
Another key takeaway from the report is that prime rents across Europe are increasing as the demand for higher-quality space, particularly for assets that are ESG compliant, is significant.
'We are seeing pressure to repurpose space that doesn’t meet contemporary demands as a growing proportion of buildings face obsolescence,' said Luke Dawson, head of global and EMEA capital markets at Colliers.
'This is driving a shift in value-add plays across key markets, especially where high importance is placed on ESG, such as the UK and Australia.'
