Showing posts with label office development pipeline. Show all posts
Showing posts with label office development pipeline. Show all posts

Tuesday, September 9, 2014

CBRE: Western European Office Market Takes-Off With Highest Demand Since Financial Crisis




  •  London recorder highest demand increase: 29%
  •  Paris was the city with the highest volume of rented office spaces in the past two years
  •   In Milan the volume of rented spaces doubled


The demand for office space across Western Europe has hit its highest level since the financial crisis, according to the latest research from CBRE, the global real estate advisor.

City Tower Sofia - executant OCTAGON
Corporate real estate occupiers are returning to the market with new office space requirements as demand in the second quarter (Q2) of 2014 rallied by 21% on the first quarter, marking the highest Q2 office take-up in Western Europe since the economic downturn. Central to this was strong activity in Milan and Lisbon, while London retained its dominant position as a popular destination for corporate occupiers with a 29% quarterly take-up increase. Milan’s take-up more than doubled in Q2 to 94,000 sq m while Lisbon recorded one of its strongest quarters in recent years. In addition, the Paris office market which had been subdued during the downturn with occupiers lacking the confidence to relocate, posted its highest office take-up level for two years in Q2, representing a 28% uplift from Q1. Across Europe as a whole, aggregate take-up rose by a healthy 12.2% compared to the first quarter of the year.

City Tower Sofia - executant OCTAGON
As a result of this increased demand, the aggregate office vacancy rate in Western Europe fell in Q2. Central London saw a third consecutive quarterly decline in vacancy rates with prime space now in very short supply. Likewise, increased demand for office space in Brussels, Paris and Amsterdam also contributed to vacancy declines. Frankfurt saw the most noticeable drop, where vacancy fell sharply for the second consecutive quarter due to the removal of obsolete stock and the conversion of older commercial buildings into residential units. Despite this, the overall vacancy rate remained flat across Europe for Q2 skewed by a large volume of new office completions in core Central and Eastern European (CEE) markets which are yet to be occupied. For example, office stock is forecast to grow by at least 10% in Prague, Warsaw, Moscow and St Petersburg over the next 18 months, a large percentage of which is being built on a speculative basis.

City Tower Sofia - executant OCTAGON
The knock-on-effect of office vacancy declines, particularly in Western Europe, is likely to put upward pressure on prime rents in the longer term. Madrid, for example, has seen its prime rent increase from €24.50/sq m per month to €24.75/sq m per month in Q2, its first rental growth since the recession, symbolic of improved economic stability. The strongest performing office markets continue to see the steepest rises in prime rents, Dublin saw rents rise by a huge 14.2% in Q2 to €430.50/sq m per annum driven, in part, by strong demand from Technology, Media and Telecoms occupiers. London’s West End market recorded a 2.4% increase in rental growth across the same period.

City Tower Sofia - executant OCTAGON
Tim Hamilton, Senior Director, EMEA Global Corporate Services, at CBRE explains: “We are seeing greater corporate appetite to lease or acquire space, particularly across Western Europe, which is encouraging. It signifies that corporate occupiers who have been hamstrung in recent years by tightening budgets and stringent cost management strategies resulting in a contraction of take-up levels, are now in a position to flex their muscles and take new space. As the markets become more buoyant, the growth in prime office rents is likely to become more widespread over the next 12 months particularly given the short supply and a relatively thin office development pipeline. Having spent a number of years taking advantage of falling rents, occupiers will need to start factoring in potential future rental increases into their strategic decision making.”

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