Europe’s office leasing markets are in rude health as they reap the benefits of markets fully reopening from Covid-related restrictions, new research from advisor Cushman & Wakefield shows.
A total of 12.6 million m2 of office space was leased in 2022, a 15% jump on the 10.9 million m2 leased in 2021, and sitting well above the fifteen-year average of 10.3 million m2.
The growth in activity was evident across the majority of markets with 23 out of 30 markets tracked reporting year-on-year growth in leasing activity. Major markets including Milan (+37%), Warsaw (+34%), Madrid (+32%), Paris (+26%) and London (+22%) all showed robust levels of activity.
‘As occupancy levels pick-up, occupiers are focussed on taking the best-in-class space in the most desirable locations to attract and retain staff and ensure they have the right space to enable more flexible ways of working as well as ensuring there is the right space for collaboration, staff wellbeing and connectivity,’ said Nigel Almond, head of data analytics at Cushman & Wakefield. ‘With a growing number of countries now demanding tighter environmental standards, occupiers are focussed on securing space in buildings that meet the highest standards.’
The drive for good quality space has helped drive rental increases on prime offices, which rose by 6.2% year-on-year in Q4 2022 compared with just 1.7% in Q4 2021. This was the strongest annualised reading since mid-2008.
Almond added: ‘The demand for new space has not been at the expense of downsizing. Across the markets tracked net absorption levels was positive across Europe in every quarter in 2022, having been largely negative since mid-2020. Quarterly absorption averaged over 643,000 m2 in 2022, well above the ten-year average of 530,000 m2.’
The total amount of space available for occupation across Europe showed a modest 0.7% increase year-on-year to 22.6 million m2, equivalent to 8.1% of total stock. This ratio has been stable at this level over the previous four quarters.
Luxembourg has the lowest ratio of available space to stock at 4.2% with three German markets – Hamburg (4.4%), Berlin (4.7%) and Munich (5.2%) – in the lowest five markets, with Paris fifth at 5.5%. Many cities are benefiting from stronger levels of take-up and limited construction activity, which is helping to keep the amount of available space at relatively low levels.
Completion levels have been falling recently as well as construction activity. A total of 4.3 million m2 of new space was completed in 2022, down from 4.8 million m2 in 2021, with the amount of space under construction totalling 15.2 million m2 at the end of 2022, equivalent to 5.4% of stock. ‘The is the lowest rate since 2017 and will help insulate the market from what is expected to be a more challenging environment in 2023,’ C&W said.
