Moscow office rents spike

The cost of renting office space in Moscow rose almost 42% in 2007, according to Jones Lang LaSalle's latest European Office Property Clock. Major Western European capitals also experienced significant increases, but not to the extent of the Russian capital. Office rents rose 21% in London, 16% in Madrid and 13% in Paris over the last year.

Alastair Hughes, Jones Lang LaSalle's CEO for EMEA commented: 'Although another eight markets moved into the 'rental growth slowing' quarter of the European office clock in the last three months, rental growth expectations generally remain positive.'

In 2007, take-up reached an all-time high of 14 million m2, about 7% more than the previous year and nearly 40% above the five-year average. At a city level the highest increases over the year were recorded in Düsseldorf (+51%), Moscow (+49%), Edinburgh (+44%) and Lyon (+43%). Demand was below the previous year's levels in Prague (-32%), The Hague (-30%) and Brussels (-23%). However, all markets showed positive net absorption of a combined 6.9 million m².

Overall, completions in Europe picked up. Office completions amounted to 1.6 million m² in the fourth quarter of 2007, the highest quarterly volume since the fourth quarter of 2003, bringing the year's total to 5.3 million m². Overall, 3.2 million m² was completed in Western Europe and a further 2.1 million m² in Central and Eastern Europe thanks to the booming Moscow market.

JLL said prime rental growth slowed overall in the second half of 2007. However, 12 out of the 24 markets saw prime rents increase during the final quarter of 2007, led by Luxembourg (+14.3%), Moscow (+13.3%) and Lyon (+4.2%). Demand for office space continued to persist at high levels, leading to further rental growth in Europe’s office markets in the fourth quarter of 2007. The European Office Rental Index, based on the weighted performance of 24 markets, increased by 1.5% over the quarter, lifting prime rents in Europe by 10.5 % compared with a year ago.