The European composite score for office property markets remained constant, at 63, according to Moody's 2007 Semi Annual Assessment of Office Property Markets. Despite this, the data shows a general trend that markets across Europe (with some exceptions) are improving and the composite score reflects a strong yellow market. However, the report also adds that the data, based on figures from mid-year 2006 and mid-year 2007, was complied before the credit crunch took full effect and this event is therefore not captured by the figures in the report.
The European composite score for office property markets remained constant, at 63, according to Moody's 2007 Semi Annual Assessment of Office Property Markets. Despite this, the data shows a general trend that markets across Europe (with some exceptions) are improving and the composite score reflects a strong yellow market. However, the report also adds that the data, based on figures from mid-year 2006 and mid-year 2007, was complied before the credit crunch took full effect and this event is therefore not captured by the figures in the report.
The twelfth update of Moody's Red-Yellow-Green analysis also found that there has been some considerable movement on an individual market level and nine markets have been reclassified. In particular, the report found that the most significant market deterioration was seen in Warsaw, whilst the most improved market conditions were observed in Glasgow.
Overall the report found that London continues to perform strongly, despite historically low office yields in the UK. The Docklands is now the market leader (with a score of 86) and the West End maintains the lowest overall vacancy rate. In contrast, London City is beginning to show signs of weakening, with the "credit-crunch" expected to have an impact on occupier demand.
'In the current economic climate, the London - City market is likely to be most at risk from a downturn in letting activity due to its high proportion of financial sector occupiers. The London - West End market is less susceptible to this risk due to its diversified tenant base and a smaller construction pipeline,' said Richard Urban, a Moody"s Associate Analyst and co-author of the report.
The report also found that German markets remain relatively robust and Frankfurt was singled out as having shown significant improvement, moving from a red market to a yellow market.
'This improvement was mainly driven by a reduction of approximately 30% in forecast completions into 2008 and higher projected net absorption levels. However, the Frankfurt office market is vulnerable to the effects of the global credit crunch as the majority of office letting demand is from the financial services sector,' said Rod Bowers, a Moody's Associate Analyst and co-author of the report.
