Office take up across Europe falls by 27%

Overall take-up volumes in Europe during the fourth quarter of 2008 were down 27% on the previous year at 3 million m2, and down 2% quarter on quarter, according to Jones Lang LaSalle's Q4 2008 European Office Clock.

Chris Staveley, head of JLL's Cross Border team said: 'At the end of 2008 15 markets on our European Office Property Clock were in the quadrant we define as ''rents falling''. One of them was Moscow, where prime rents dramatically fell by 26% during the fourth quarter. In 2009 further downward pressure on rents will be seen for the most European markets.'

In Western Europe further rental falls during the fourth quarter were reported in London West End (-11.6%), Dublin (-5.2%), Barcelona (-3.8%), Brussels
(-3.5%) and Madrid (-1.8%). Stockholm (-6.8%) and Milan (-3.5%) entered the rents falling quadrant on the Office Clock for the first time in this cycle. Conditions have changed dramatically in some Central and Eastern Europe markets with prime office rents decreasing by 26.3% in Moscow and 15.2% in Warsaw during the fourth quarter, although rents in Budapest and Prague stood firm. All other European markets recorded stable prime rental levels with only Lyon recording positive prime rental growth of 2% on the quarter. As a general trend rental incentives increased over the last quarter, including those markets where prime face rents remained flat.

Overall take-up during 2008 reached 12.5 million m² which is 12% down on 2007 volumes. On a city level, the highest falls during 2008 were recorded in Dublin (-40%), Madrid (-38%), Stockholm (-36%), Barcelona (-23%) and Edinburgh (-20%). Activity also decreased in Europe's largest markets, London (-15%) and Paris (-14%). In the German markets the decrease in office demand has been smaller in comparison to other European countries; however, take-up volumes are falling there too. Only six out of 24 markets recorded take-up volumes above levels witnessed in 2007, these were: Luxembourg, Prague, Rotterdam, Milan, Warsaw and Budapest.

Chris Staveley concluded: 'Given the weakening economic outlook for the European office market, and major job cuts are now occurring in various business sectors office demand is expected to suffer further in 2009. The financial centres of London, Paris and Frankfurt being particularly at risk from deteriorating levels of occupier demand.'