The third quarter of 2010 has seen the aggregate vacancy rate in Europe level off at 10.1% , according to the latest research by CB Richard Ellis (CBRE). In some key markets, such as London and Munich, available supply is shrinking. However, sizeable variations exist within many cities, with vacancy rates for prime CBD space typically lower, even in places where aggregate vacancy remains high.
The third quarter of 2010 has seen the aggregate vacancy rate in Europe level off at 10.1% , according to the latest research by CB Richard Ellis (CBRE). In some key markets, such as London and Munich, available supply is shrinking. However, sizeable variations exist within many cities, with vacancy rates for prime CBD space typically lower, even in places where aggregate vacancy remains high.
Take-up across the European office markets is reported as significantly higher than last year’s levels, an increase of 30 per cent says CBRE’s Q3 2010 EMEA Office Occupier MarketView. The improvement reflects the continuing ability of corporates to rationalise and consolidate space on favourable terms, with few markets seeing much genuine expansion demand. London and Frankfurt are among the markets that have seen some major acquisitions, which has led to a boost in leasing figures.
Prime rents remained stable in most of the main European office markets, and for the first time since mid-2008 the EU-27 prime rent index is now showing growth on both a quarterly (0.6%) and an annual basis (1.1%), indicating the bottom of the rental cycle. In the few markets where rents are still falling, it is clear that the rate of decline has slowed. CBRE reports rental growth in some key markets, such as the City of London, although outside these few locations, upward rental momentum looks very limited in the short term. Rent differentials between prime and secondary space are expected to widen.
Matthew Pullen, Head of Global Corporate Services, EMEA, at CB Richard Ellis, said: 'There are several indicators to show the cycle stabilising, although continued problems in European economies are likely to restrain the recovery phase. Take-up is so far characterised by continued corporate consolidation and occasional banner transactions, but rental recovery will need more broad-based demand momentum.
'Despite a more stable vacancy picture, the availability and terms of development finance remain restricted. This will limit the reactivation of mothballed development schemes in the near term and shortages of new prime buildings are likely to become more widespread over the next two years. Corporates with large strategic requirements will increasingly need to act quickly or consider pre-letting.'
