Real Estate Market
21 April 2016The Jones Lang LaSalle Property Clock Q1 2016

Office rents

The European Office Index for rents rose by 0.6% q-o-q in Q1 2016, slowing from 1.0% in Q4. Of the 24 index markets, seven saw q-o-q rental increases (compared with ten in Q4 2015). While quarterly growth was marginally slower compared with Q4 2015, this is not unusual for the first three months of the year and general sentiment continued to be positive.

 

In Paris, improved occupier sentiment pushed up rents for the third consecutive quarter (+0.7% in Q1), after a prolonged period in which prime was relatively volatile and not finding its direction. In Spain, Barcelona (+1.3%) and Madrid (+0.9%) continued their strong run. Other office markets that recorded growth in Q1 were: Budapest (+4.8%), Frankfurt (+2.8%), Milan (+2.1%), and Stockholm (+1.9%). In London, and all other European cities, prime rents remained unchanged.

 

As at Q1 2016, 15 office markets are placed between 09:00 and 12:00 on the office clock, compared with 10 in Q1 2015, indicating that rental growth rates are slowing in these cities. However, this hides a more subtle message around prolonged rental growth. The vigorous recovery in demand, coupled with often tight supply (especially in the prime segment), caused rents to quickly bottom out and accelerate in some markets. For example, sharp annual rental growth rates in Dublin (25%), Stockholm (17.8%), Berlin (9.1%) and Luxembourg (7.1%) are unlikely to be repeated in the year ahead.

 

As many markets moved through the 06:00 – 09:00 segment of the office clock quickly, we now forecast a longer period of more steady rental growth. Indeed, at 2.6% and 2.7% in 2016 and 2017 respectively, rental growth in Western Europe looks set to outperform the 10-year average. 

 

Source: The Jones Lang LaSalle EMEA Research

09 October 2014



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