European office market comes back to life

European market comes out of the crisis, but the changes take place in differing pace depending on the localization.

Predictions for the European office market are optimistic: the market is enlivening and the improvement of overall economic predictions influences the improvement of moods. According to the report conducted by Jones Lang LaSalle European Office Property Clock Q3 2013 the situation and improvement on markets is different and depends on the specific situation.


With the use of clock scheme, the report compares the relative location of separate European markets in next phases of the cycle of changes in rent rates for the best office spaces. According to the data of Jones Lang LaSalle, the rent rates in Europe has not maintained the positive tendencies from the beginning of the year. In the third quarter, the European rents index has noted a fall by 1,1 percent, primarily due to the decreases in Paris (-7,2 percent), Milan (-4,2 percent), Prague (-2,4 percent) and Barcelona (-1,4 percent). It's caused by the decrease in demand, search for savings and careful stance of the leaseholders. Increases in rent rates were noted in London (+2,6 percent), Munich (+ 1,6 percent) and Frankfurt (+1,5 percent), which was caused by a combination of increased demand and lack of high quality office spaces. In the period described, the rent rates in Warsaw remained stable.


Costs of rent of a modern office space has increased in the third quarter of the year to 22 - 24 Euro for meter square per month in Warsaw's city center and 14,50 - 14,75 Euro outside it, n districts like Mokotów - says Mateusz Polkowski, Head in Research and Counseling Department in Jones Lang LaSalle. What's interesting, rent rates for the most prestigious office locations in Warsaw are the highest in East - Central Europe and higher then those in Berlin, Copenhagen and Lyon. Nevertheless, the rent rates for modern office spaces in Warsaw remain under the decrease pressure, caused by very high new supply entering the market. It causes the increase in vacancies index and that makes the market even more competitive - he explains.


In the third quarter of 2013 the activity of leaseholders on office markets in Europe has decreased by 6 percent in relation to the previous quarter and by 9 percent in relation to the analogous period of the previous year. An intense increase in demand has been noted on the London's market, while the decrease in the growth rate was noted in German and Scandinavian markets. One can see the influence of unfavorable economic conditions in Paris as well. On the markets of southern Europe, a small demand reigns, however it is predicted to raise by 2014. In East - Central Europe, good results of Warsaw and Budapest can be seen. Experts of Jones Lang LaSalle predict and improvement on European market caused by better moods of investors and the predicted economic improvement.


In the period described, office market in Europe has gained 1,3 million meters square of new space. The biggest supply is noted in Paris, London and Moscow. According to the analysis, the year will end with a total volume of 4,3 million square meters, which means an increase by 12 percent in relation to 2012. The vacancies rate has stabilized at 9,7 percent.


Warsaw remains one of the most active office markets in East - Central Europe both in demand and supply - describes Anna Kot, Office Space Renting and Leaseholder's Representation Department in Jones Lang LaSalle. The activity of the developers remains on its high level and over 570 000 sqm of space is currently under construction. In the third quarter, the Capitol's market has gained 94 000 sqm and according to our analysis, the 2013 will end with a total supply of 320 000 sqm. Demand remains on a stable level as well - in the September of this year, deals of renting of over half of million sqare meters were signed and 2013 should end on a record breaking level of gross demand. High level of demand will not be able to compensate fully for the huge volume of office space entering the market, so we're expecting the increase in the vacancies level index - she says.


Full version of the report (in English) is available in the PDF file below.

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