Despite most office rents in Europe improving in the third quarter of the year, JLL's office index crept up only 0.6%, due to considerable rental falls in London and Moscow.
Average rates in the UK capital dropped 4.2% compared to the previous quarter, while rents slumped 6.3% in Moscow according to the new report.
'The financial sector is a strong driver of demand for core West End office product, and weaker sentiment within the sector has fed through to lower prime rents,' commented Ben Burston, director of UK offices research at JLL. 'Prime West End rents reflect the premium end of the London market, which has been impacted by more subdued demand in the aftermath of the EU referendum,' Burston explained.
Excluding London and Moscow, quarterly European office rental growth reached 1.8%, a 5.8% rise year on year, the highest uplift since Q2 2011.
JLL's office index also takes into account leasing volumes, which fell 7% year on year in Q3 2016, affected by lower activity in the UK and Spain.
However, the report said that office market fundamentals remain strong in mainland Europe, with Q3 take-up still 9% ahead of the 10-year average.
Stockholm recorded the largest increase in Europe for the second consecutive quarter (+6.9%) while Berlin also witnessed a significant quarterly increase (+3.9%), pushing annual growth to a record 15.2%. A fifth consecutive quarter of rental growth in Paris (+3.4%), where leasing volumes were up 5% year-on-year, underlined the French capital's strength.
Looking ahead to 2017, JLL said that leasing volumes were likely to remain steady in Europe, while the climate of limited supply would keep pushing up rents.
Rental growth across Europe is forecast to come in at 2.5% for the full-year 2016, before easing to 1.5% in 2017.
