Q3 2018: The office markets in Europe still flourishing
The activity of the office letting market continued unabated in Europe, as volumes taken-up in Q3 2018 alone reached a peak of 2.37 million m² in the main 15 European markets. This was the most dynamic Q3 since 2007. Take-up over the 9 month period also rose 5% compared to 2017, with 7.2 million m² transacted this year since January. Even though the outcome of the Brexit process remains unclear, Central London recorded its best 9 month result since 2014, notably thanks to attractive lease terms; shorter lease lengths and higher incentives specifically. Volumes in Germany’s four main markets almost equaled the record take-up of 2017 (-3%) with 2.16 million m² transacted. The market was mostly fueled by units less than 5,000 m² in size. In this context, Munich proved extremely attractive (+16%) while other markets remained well above their long term average albeit with lower volumes compared to last year. Central Paris, benefitting from solid employment conditions over the year, increased by 3% with 1.63 million m². The most impressive growth was seen in Milan, where volumes rocketed (+25%). Q3 alone was the best ever for Milan. Very high results were also obtained in Lisbon (+27%), Madrid (+19%), Warsaw (+15%) and Dublin (+9%). Volumes decreased in Prague, Luxembourg (-14%) and Amsterdam (-12%) but remained above their average.
There is less office space available in Europe, as vacancy reached 6.6%, contracting by 120 basis points compared to October 2017. The lowest vacancy rates are still found in Germany, especially in Berlin (2%, representing only 380,000 m² available) and Munich (2.6%). 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 and Dublin (-120 bps), Madrid (-80 bps), Central London (-60 bps), Luxembourg (-50 bps), Brussels and Vienna (-40 bps).
Prime rental values remained steady or increased in all main European markets, except in Central London (-8% vs. October 2017) where prime rents reached £1,238/m²/year. Madrid (+21%, €408/m²/year) saw the most significant growth in rental values. Other big increases were in Milan (+12%), Berlin (+10%) and Lisbon (9%).