Tightening supply of prime office space in Europe is causing prime rents to accelerate, according to real estate advisor CBRE.

Tightening supply of prime office space in Europe is causing prime rents to accelerate, according to real estate advisor CBRE.

Demand for the best office premises is continuing to rise, with more companies recognising the importance of being located in amenity-rich central locations, close to market peers and in the best properties, in order to attract the most talented employees.

While this is a general phenomenon, the London and Madrid office markets demonstrate this particularly well. In the City of London market occupier demand rose by 12% in the first quarter, and the West End experienced its most active start to a year in the last three.

Meanwhile, the Spanish capital recorded its strongest first quarter for two years with 125,000 m2 of space acquired by occupiers. Compared to the same period last year, Western Europe has seen total aggregate office take-up grow by 4% year-on-year.

The supply of available office space across Europe has been broadly stable since mid-2013, but has now started to show clearer signs of tightening. As a result, and compounded by low levels of development in many cities, prime rents are increasing across Europe.

Dublin, for example, has seen a 5.6% increase in the first quarter of this year from €484 to over €510 per m2 per annum. This completes an annual rise of nearly 36%, the strongest across EMEA, which demonstrates its popularity as a prime business location. The strongest quarterly rent increase was posted by Helsinki which rose by 8.8% to €444 per m2 per annum.

'Companies understand that to prosper in today’s marketplace they need to provide office conditions that reflect the modern employee’s needs. Increasingly, this means centrally located, well-connected, amenity-rich work places that provide a destination space to stimulate collaboration and development,' said Richard Holberton, EMEA head of occupier research at CBRE. 'This is one reason why prime rents for the best locations are on an upward trajectory, as such space is coming under increasing pressure. The solid start to this year sets the expectation that a further upswing in the office market is likely for the year ahead.'