Q1 2019: Take-up hovering around its long term average as occupiers expand space
Occupier demand in the main 15 European markets remained solid in Q1 2019 though recorded a slight decline of 3% compared to Q1 2018, with 2.34 million m² of lettings. Results continue to vary quite considerably by city market with records achieved in some and sharp fall backs in others.
Following very high results achieved in 2018, the office markets in Central Paris and Central London experienced significant decreases in take-up as volumes dropped by 23% (representing 481,313 m²) and 21% (279,048 m²) respectively. Both markets were hampered by the lack of large-scale deals but take-up remained in line with 10-year averages. Volumes in the four main German markets decreased (-4%) overall, with great variation at city level. Berlin (+13%) took the lead among the German markets and set a new record for Q1 with 244,000 m² of take-up. Hamburg (+20%, 130,000 m²) also proved dynamic whereas Munich (-16%, 194,000 m²) and Frankfurt (-32%, only 89,000 m² transacted) stepped back. The most impressive growth was recorded in Brussels, where volumes rocketed by +210%. With almost 245,000 m² transacted, Q1 2019 was the best quarter ever in Belgium’s capital. Thanks to a number of mega deals (> 10,000 m²), the Dublin market rose by 66% to reach 133,000 m² and Q1 was the third strongest quarter on record. Milan also stood on the podium of greatest take-up increases with +44% (127,252 m²). At the other end, the market contracted the most in Luxembourg, where only 16,624 m² was taken-up (-62%).
The average vacancy rate in Europe reached 6.1% at the end of Q1, representing a 100 bps fall year-on-year. The share of empty premises contracted in most markets, or at least remained stable. The lowest vacancy rate in Europe was still recorded in Berlin (1.6%, representing only 314,000 m²), followed by Munich (2.3%) and Luxembourg (4.3%). Vacancy dropped the most in Amsterdam and Lisbon (-250 bps each), whereas Warsaw, Frankfurt (-180 bps) and Dublin (-160 bps) also saw important declines in vacancy.
Prime rental values remained steady or increased in all main European markets, except in Central London (-2% vs. Q1 2018) where prime rents settled at £1,211/m²/year. Madrid (+12%, €420/m²/year) saw the most significant growth in rental values. Other big increases were in Hamburg, Berlin (+9%), Milan, Munich and Frankfurt (+5%).