European office supply restricted until 2013: CBRE

New office completions in major European markets could fall by over 30% in 2011 compared with 2010 and could decline further in 2012 as the low level of construction starts during the economic crisis feeds through, according to a new report by CB Richard Ellis (CBRE).

The credit crunch and ensuing economic crisis in 2008 had a major impact on office development activity, prompting many developers to downscale or delay planned projects. As a result, new office completions in major European markets will experience a sharp contraction in the next two years and will remain subdued throughout 2013, the report says.

European office development in the main Western European markets in 2011 is predicted to fall by one third compared with 2010, and by over 40% on the market peak recorded in 2008. While the longer term development pipeline is still difficult to measure at this point, preliminary forecasts for 2013 point to only a modest pickup of 12% on 2012 development levels. This will leave office development completions at nearly 50% lower than at their peak in 2008, the report stated.

London is one of the few major European office markets where the recovery in property values and rents has reignited substantial interest in new development and conditions are in place for a relatively quick recovery. Central London in particular is predicated to see completions in 2013 triple compared to 2011 and could rise further in 2014 when a number of tower office schemes are due to complete in the City of London.

Paris is also beginning to see signs of a revival in the office development cycle and a number of speculative development schemes have recently started. However, most European cities are expected to see a particularly sharp year-on-year reduction in office development completions, including Barcelona (-69%), Amsterdam (-66%), and Madrid (-50%).