Prime office rents continued to grow during the third quarter, albeit at a slower pace, according to Jones Lang LaSalle’s Q3 European Office Clock. The Office Rental Index rose by a modest 0.7% over the quarter, driven by London, Moscow and Stockholm.

Prime office rents continued to grow during the third quarter, albeit at a slower pace, according to Jones Lang LaSalle’s Q3 European Office Clock. The Office Rental Index rose by a modest 0.7% over the quarter, driven by London, Moscow and Stockholm.

Patricia Lannoije, Head of Research Belux at Jones Lang LaSalle, said: 'The research also shows that demand for office space decreased slightly over the quarter, but stands 36% higher than a year ago with net absorption remaining positive. Further yield compression pushed capital values higher; the capital value index increased 4.7% over the quarter. Yield compression was witnessed in 13 out of 24 markets with Paris and Moscow both experiencing compression of 50 basis points.'

The majority of Europe's economies continue to recover - albeit with substantial differentials. Prime rents across the region increased modestly, with the Q3 Office Index, based on the weighted performance of 24 markets, increasing by 0.7% over the quarter. This continued the growth seen since the beginning of the year, albeit at a slower pace.

The increase was driven by Moscow (+6.3%), Stockholm (+5.4%) and London (+2.9%). Rents were unchanged for the rest of the Index markets including Brussels and Luxembourg with the exception of Spanish cities with rents in Madrid decreasing by -2.7% and by -2.5% in Barcelona. Hefty incentives remained a feature of many markets and net effective rents were on average 17% below prime face rents, with the largest spread reported in the UK, Ireland and some Dutch markets. There also remained a clear differential between prime and secondary space with rents for secondary space remaining under downward pressure.

As economic growth returns, occupiers are increasingly committing to deals, although much activity remains driven by consolidation and churn. With 2.5 million sq m transacted in Q3 2010, office take-up decreased by 8% over the quarter. This is not unusual given the summer season and, compared to this time last year, take-up was 36% higher and only 5% below the five year average. And comparing the first nine months of 2010 with the same period last year, take-up was already 39% higher.