European office markets set for recovery in 2010: BNP Paribas

The year 2010 will be one of recovery for Europe's office markets as demand for prime assets increases and rents stabilise, according to research by global property adviser BNP Paribas Real Estate. The firm bases its findings on take-up, rental growth and investment data across 34 key European cities.

While take-up across the 34 cities fell by 33% overall in 2009, the fourth quarter regained momentum with an upswing of 7.4% and take-up levels not seen since Q3 2008 across Europe. Some notable winners were Central London which had more take-up in 2009 than 2008, and Central Paris where a significant amount of deals were completed in the final quarter of 2009. In terms of rents, the correction continued in 2009 with falls reaching 50% in Eastern Europe. These stablised in the fourth quarter of 2009 after having fallen over 18% across Europe in two years.

Andrew Cruickshank, international investment director, commented: 'It is good news for investors that rents have stabilised and now demand for prime offices across Europe is increasing again due to a limited supply. However, there were further falls in rents in cities such as Madrid where tenants still have the advantage in negotiations, and the peripheral areas of most cities as vacancy rates remain high.'

European investment is also set to rise again in 2010 following a 41% decrease in volume across the 34 cities in the BNP Paribas Real Estate index. Central London led the way with some large investment deals completed for prime buildings, mostly bought by overseas investors. Central Paris and Stockholm followed but there was a huge decline in investment volumes in 2009 from 2008 figures. Milan was one of the only cities to see more deals transacted in 2009 than in 2008 but this was very marginal. Over the two years of the crisis, the largest drop was registered by Bucharest which saw a fall in volume of 99% while Lille investment volumes only fell by 18% and two cities (St Petersburg and Athens) saw increases in investment volumes of 38% and 27%.