Office take-up in Western Europe down 10% on 2011: BNPPRE

Office take-up in Western Europe is down 10% on last year on a rolling year basis to Q3 2012, according to BNP Paribas Real Estate (BNPPRE).

Take-up has weakened in the nine Western European cities monitored, with Central London and Central Paris slowing down the most, whilst German cities have performed relatively well. Despite achieving their highest quarterly take-up in 2012 so far, Milan and Madrid remain the weakest markets.

Andrew Cruickshank, international investment director at BNP Paribas Real Estate, commented: 'A slight contraction in the average vacancy rate was recorded in Q3 2012. Currently, availability is either stable or decreasing in all cities except Central London, where the delivery of London’s tallest building, the Shard, resulted in a large amount of new supply this quarter.'

Thanks to consistent demand in Germany, the downward trend in immediate supply in German cities continued, despite the higher level of completions on the previous quarter. In addition, prime office rents were steady overall in Q3, stabilising in Madrid but dropping in Milan.

Office investment continued to rise in Western Europe on a rolling year basis (+19%) and reached the highest level since Q2 2008. However, there are differences between the main markets. For example, Central London and German cities were clearly driving the activity in Q3 and strong investor demand even led to slight yield compressions in Munich and Hamburg. Investment activity in Paris is holding up well with a 20 bps decrease in prime yield, unlike Madrid, Milan and Brussels. In Madrid and Milan, as risk aversion increased, the lack of activity was reflected in higher prime office yields.