Good momentum despite a slowdown in the economy
Aggregate take-up over 9 months in the main 15 European markets stood at 7.15 million sqm of lettings, and fell marginally below the same period in 2018 (-1%), which was by far the best result of the decade. Despite being well above the 10-year average after 9 months, there are changes occuring in the composition of take-up among European markets. Growth appears more supported by mid-sized deals than by large unit lettings.
Central Paris and Central London are still behind Q1-Q3 2018 volumes with decreases to 1,487,000 sqm (-9%) and 857,000 sqm (-18%) respectively. The market in the French capital is still suffering from the fall (-29%) in the large unit segment (over 5,000 sqm) while serviced office sector activity is driving a large proportion of London’s take-up. However, encouraging signs exist for both markets, as full-year take-up for 2019 is expected to come in at 2.3 million sqm for Paris and Q3 was the strongest quarter this year in London. The four main German markets are benefiting from job growth and as a group equalled the performance of last year. Berlin (726,000 sqm, +26%) drove the result whereas the other cities, though behind last year’s results, are still well above their long-term average. The most impressive rise in volumes was in Brussels (+80%) where the 9-month total already exceeds the best full-year result seen in 2010. The market also continued unabated in the Spanish markets (Madrid, +26% and Barcelona, +16%) and Milan (+13%).
The vacancy rate is still contracting everywhere in Europe and reached record low levels in several markets. Moreover, vacancy fell below the 10% mark in all 15 main markets for the first time in Q3. The three lowest values were in Berlin (1.6%), Munich (2.3%) and Luxembourg (3.7%). The sharpest drops year-on-year were in Warsaw (-200 bps), Dublin (-180 bps) and Amsterdam (-140 bps).
Prime rental values remained steady or increased in all main European markets, except in Central London (-2% vs. Q3 2018) where prime rents reached £1,211/m²/year and in Vienna (-2%). Hamburg (+15%, €372/m²/year) saw the most significant growth in rental values. Other big increases were in Berlin (+12%), Warsaw and Madrid (+7%).