Take-up of office space in Europe fell 21% in the first half of 2023 compared with the year-earlier period and was down 15% on the five-year H1 average, according to new research from Savills.
The biggest decreases in take-up against the five-year average were registered in Lisbon (-62%), Cologne (-51%) and Dusseldorf (-44%), while the biggest increases were seen in Luxembourg (+137%), Oslo (+22%) and Prague (+13%).
Savills said the overall lower take-up reflected both cyclical and structural factors. Amid increased economic uncertainty, businesses are looking to reduce operational costs and taking longer to complete leasing transactions as a result.
At the same time, companies are still seeking to optimise their hybrid working strategies in the wake of the pandemic and work out what this means for their office footprint. By 2026, Savills estimates the net impact on European office demand will be 10% below pre-pandemic levels.
Biggest takers of space
In terms of leasing activity, the professional and business services sector - headed by legal and accountancy firms - continues to take the lead with a 28% share of total office space take-up in H1. This is up from 24% a year ago.
For example, in London, law firm Goodwin Proctor signed for 8,300 m2 of space in the city, while in Berlin, professional services firm Boston Consulting Group signed for 19,000 m2 of space in the AP15 building which will be completed by end-2024.
At a city level, Madrid and London City were found to have the highest share of professional and business services take-up, at 40% and 35% of their total market take-up respectively.
Mike Barnes, associate director, European research at Savills, said: ‘Given the tight labour market, professional services are clearly using real estate as a way to attract and retain talent in the industry, and we expect this group to continue to be one of the largest drivers of office demand over the next 12 months.’
The second-largest sector in terms of take-up, banking, insurance and finance, took a 17% share of total European take-up recorded during the first six months of the year, down from 20% year-on-year.
Christina Sigliano, EMEA head of global occupier solutions at Savills, added: ‘European firms will be taking steps to mitigate risk and reduce costs over the next 12 months and the following year will continue to be characterised by leasing caution. Nevertheless, a strong labour market and resilient hiring intentions will support underlying demand, especially in the professional and business services sector.’
