According to Jones Lang LaSalle European Office Index, Europe is now recording slight reductions in office rents for the first time since Q4 2009. Prime office rents fell by 0.3% in Q1 2012.
The net reduction masked both rises and falls across several prime office rental markets. Falls were recorded in Brussels (-5.0%), Madrid (-1.9%), Barcelona (-1.4%) and Paris (-1.2%) whilst rental increases were recorded in Luxembourg (+5.3%), Stockholm (+2.4%) and Hamburg (+2.1%).
Stable rental markets to continue
In the wake of the adjusted economic outlook for the region as a whole, growth forecasts for 2012 have been revised downwards. Markets with more robust economic conditions such as the UK and Germany are likely to perform well, while struggling economies such as Greece, Portugal, Spain and Italy will see on-going strains in occupational markets and rents. The Jones Lang LaSalle office clock shows the spread between markets across the region, with the first market (Amsterdam) reaching 12 o'clock, indicating its next move will be rental reductions, whereas 14 markets still remain at or before 6 o'clock, indicating that rents still bottom out or stabilize.
Steady leasing volumes but 2012 to be down on 2011
Office occupiers are expected to remain cautious in the short term and current expectations are for leasing volumes over 2012 to be slightly lower then 2011 - but in line with long term averages. Take-up in Q1 2012 totaled 2.3 million sq m, 15% below Q1 2011 with leasing volumes in Germany decreasing from the high levels of last year and an 18% reduction in Paris.
Absorption down 16% on Q1 2011
Annual net absorption, representing the change in occupied stock, totaled 3.1 million sq m which is 16% lower than in Q1 2011. Levels in Western Europe increased driven by strong performance in the German markets whereas absorption slowed in the CEE region.
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