Occupational market

European Office Overview

European office take-up is forecast to reach 9.2 million sq m for the full year 2019, down marginally 4% from 2018’s end year volume of 9.6 million sq m (see below). A shortage of good quality, available space across Europe’s CBDs is limiting occupiers’ choices to relocate as vacancy rates dropped from 6.1% to 5.4% over the past 12 months (see below).

Given the shortage of new development underway, we expect vacancy rates to remain at similar levels into 2020. A shortage of new brownfield development sites across Europe’s CBDs is pushing new office demand out to fringe markets, where opportunistic investors are pursuing opportunities to refurbish, relet and sell on.

Persistent demand has applied accelerated rental growth in 2019. Indeed, prime CBD office rents have risen 6.2% on average over the past 12 months, up from 4.0% over the previous 12 months (see below). This could threaten to hamper take-up levels as 2020 approaches despite pent-up occupier demand.

Looking ahead into 2020 however, prime office rents are forecast to grow by an average of 2% across the surveyed cities, with among the strongest levels of rental growth in Stockholm (6%), Amsterdam (6%) and Luxembourg (6%). We still expect upward rental growth across the majority of the German cities, though at a lower rate than we have witnessed in 2019. The majority of cities will be experiencing growth of around 1% given a lack of new speculative product coming to the market.

_{Read the articles within European Offices Outlook below.}