The impact of incentives on European office rental values has resulted in significant changes in the ranking of the most expensive cities, according to international property adviser Savills. The firm compared 18 key city locations and found that when incentives are taken into account, London's West End remains the most expensive and Lisbon the cheapest. The study sees Paris CBD becoming the second most expensive, overtaking the City of London. Istanbul drops from sixth most expensive to 13th place, while Amsterdam slipped from eighth to 11th position.
The impact of incentives on European office rental values has resulted in significant changes in the ranking of the most expensive cities, according to international property adviser Savills. The firm compared 18 key city locations and found that when incentives are taken into account, London's West End remains the most expensive and Lisbon the cheapest. The study sees Paris CBD becoming the second most expensive, overtaking the City of London. Istanbul drops from sixth most expensive to 13th place, while Amsterdam slipped from eighth to 11th position.
Overall the research finds the average rent-free period has increased from 6.6 months in H1 08 to 8.8 months in H1 09. The longest rent-free periods were recorded in London (24-36 months over a typical lease length of 120 months), Amsterdam (21 months over 120 months), Paris La Defense (12 months over 72 months ) and Brussels (nine months over 72 months). In the remaining locations landlords offered six months or less.'
The highest increase in rent-free periods offered was in Amsterdam (from six to 21 months). In seven out of 18 (38%) locations surveyed, most notably in German markets, there was no change over the past year in the number of rent-free months offered.
Eri Mistsostergiou of Savills research said: ''We are finding that although landlords want to secure longer leases and tenants are trying to negotiate shorter leases or break options, in actual fact typical lease lengths have not altered. The only exception are owner-occupiers who are looking to dispose of their assets through sale-and-leasebacks and are willing to commit to longer leases in order to make the deal more attractive.''
On average, prime CBD effective rents throughout Europe are 11% lower compared to headline rents, while last year they were 9% lower. The highest difference between effective and headline rent in H1 09 was noted in London City (-30%), London WE (-20%), Amsterdam (-18%) and Paris La Defense (-17%). The lowest difference was noted in Athens, Istanbul and Oslo at less than -5%.
