Despite Tech And Media Takeup, Rent Growth In Europe Is Losing Momentum
Tech and co-working companies in city centres are keeping European rental rates aloft, but that momentum is moderating, according to JLL’s Global Office Index for Q4 2016. While the European Office Index rose 2.6% over 2015, that growth was largely offset by a drop in London prime rates.
Amsterdam topped the rental growth ranking in Europe, as strong demand and limited supply of high-quality space translated into rental increases. The Office Operators’ 28K SF co-working space in the South Axis was the largest deal during 2016. Co-working facilities in Amsterdam are in demand, as WeWork, HNK and Flexof all took larger spaces during the year.
Dublin’s 2016 office demand was strong, with 2.7M SF of takeup and the city centre the focus of 63% of it. Amazon’s pre-let at Vertium on Burlington Road was the largest deal, at 172K SF.
It was not all sunny skies for Dublin though, as the vacancy rate increased in the fourth quarter from 7.8% to 8.4% as an additional 410K SF came onto the market. Looking ahead, the market looks even soggier as 3.9M SF is under construction for delivery by 2019. For now, prime rents in Dublin are hovering around €55 to €60/SF.
London’s rental takeup defied gloomy Brexit predictions in the first two quarters after the EU referendum. But leasing dropped 12% from 2015 to 2016. Tech and media companies accounted for 31% of occupier demand in Q4 2016. Nikkei (Financial Times) took 185K SF over 10 floors at Bracken House on Cannon Street. The Economist Group took 27K SF at the Adelphi Building in Covent Garden. Deliveroo, NeuLion, Brain Labs Digital, Apple, Google, Snapchat and Expedia all reaffirmed their commitment to London.
Gerald Eve’s London Floor Review showed that despite the heavy tech interest, in the West End, rents fell both over year-over-year and quarter-over-quarter. In the East End, rents remained flat year-over-year and nudged from £68 to £70/SF quarter-over-quarter.
Though Paris’ central business district remained the main focus of demand amongst occupiers, the La Défense market experienced a record first half-year as takeup reached 1.3M SF. This surge of demand in the area was spurred by increased occupier activity amongst larger corporates such as Deloitte & Associés and Bureau Veritas.
The Berlin office market is characterised by scarce office supply with a small number of development projects in the pipeline. Consequently, rents are rising once again. In view of the supply shortage, tenants are tending to prolong existing leases and make more efficient use of existing space.
