The momentum seen in European occupier markets at the beginning of the year continued into the second quarter, according to the latest European Office Property Clock update from JLL.

The momentum seen in European occupier markets at the beginning of the year continued into the second quarter, according to the latest European Office Property Clock update from JLL.

Conditions continue to vary across the region, however, and while Q2 stats were encouraging, the recovery is only just starting in some markets, the adviser said. The disconnect between the strong performance of capital markets and occupier markets also remains

Leasing volumes totalled 2.8 million m2 in Q2, an increase of 19% on Q1 14 and 11% stronger than in Q2 last year.

Prime office rents continued to increase over the quarter on aggregate, though the pace was slightly slower than at the beginning of the year - the European office index increased by 0.4%, compared with 1.1% in Q1 14. Of the 24 Index markets, three saw prime office rental increases q-o-q (compared with eight in Q1), with Dublin again leading (+7.1%) driven by the rebound in demand and a severe lack of quality supply.

Munich rents (+3.2%) rose to their highest levels since the early 1990s. Positive news also came from Spain, where Madrid saw the first increase (+1.0%) since Q3 08.

In Central and Eastern Europe (CEE) JLL expects further downward pressure in Warsaw, while Budapest and Prague are expected to have reached the bottom and Moscow is likely to see stability following the downward correction in Q1.

With occupier sentiment and economic activity improving, rental decreases have become the exception, but there was a 2.5% decline in Prague due to high volumes of new supply. Prime rents elsewhere
including London, Paris and Moscow remained unchanged.

For the rest of the year, prime rents are forecast to increase further, given the low levels of quality space available. From 2015, expansionary demand should also support rental growth, the adviser predicted.