No letup in European office market activity in 2018
Take-up volume as high as in 2017
The office market in Europe is flourishing, with 2018 total volumes at the same level as those of 2017, by far the most active year in the decade. At city level, Central London benefited from the return of activity from small and medium businesses and from the high demand from the Media Tech sector, reaching 1.4m sq m (+19% over 1 year). The four main German markets combined dropped 8% but still represented 3.04m sq m, well above the long-term average. Volumes in Central Paris diminished by 9%, notably due to the lack of very large deals (-30% in transactions over 20,000 sq m). Very high results were achieved in Vienna (+54%), Luxembourg, Lisbon (+21%), Milan and Warsaw (+10%).
Vacancy contraction in Europe pushing up prime rental values
The average vacancy rate shrunk again in Europe in 2018 and probably attained its floor in several markets. The German markets still displayed the lowest vacancy rates, especially Berlin (1.7%, representing only 327,000 sqm) and Munich 2.3%). Luxembourg (3.7% of vacancy) was close to the level of German markets. Vacancy dropped the most in Amsterdam (-310 bps) and Warsaw (-340 bps). The share of empty premises fell in all the other markets, such as Central Paris (-100 bps), Central London (-120 bps), Milan (-110 bps) and Dublin (-170 bps). Prime rental values remained steady or increased in all the main European markets, except in Central London (-2% vs. the end of 2018) where prime rents reached £1,211/sq m/year. Madrid (+13%, €432/sq m/year) saw the most significant growth in rental values. Other big increases were in Hamburg, Berlin (+9%), Milan and Frankfurt (+7%).