Prime rental levels stabilise in European office markets: JLL

Prime office rental levels stabilised in the majority of European markets in Q3 2009, according to the latest Jones Lang LaSalle European Office Clock

The European Prime Office Rental Index, which is based on the weighted performance of 24 markets, decreased by only 0.8% over the quarter. Nevertheless, prime rents across Europe are now on average 16% below the level recorded a year ago, representing a rental decline not seen on record before, JLL said.

Prime rents decreased further in Dublin (-11.1%), Madrid (-6.3%), Prague (-4.5%) and Barcelona (-4.4%). However, headline rents remained at Q2 levels in 16 markets including London and Paris. Commenting on the report, Chris Staveley, head of Jones Lang LaSalle’s Cross Border team, said: 'In the cities with stabilising rental levels, landlords are offering increasing incentives to attract tenants. A number of markets are now approaching the highest rental falls in their cycle proceeding towards a rental stabilisation but further limited rental decreases are expected.'

Despite the improving economic outlook across most European countries on the back of stimulus packages and governmental interventions, business sentiment is improving only cautiously, according to the report.

Corporates continue to undergo rigid restructuring processes and their focus has been on lease renewals in the last quarter. After a short-run recovery in Q2 when total European take-up improved by 19% after an extremely weak first quarter, gross take-up did not follow an upward trend and stayed stable, slightly below 2.2 million m² from July to September.

Compared to the first three quarters of 2008, European office demand is 34% lower so far this year and stands nearly 30% below the five-year average.