Reduced volumes from the pandemic unlikely to create sharp increases in vacancy
Letting volumes in the 15 main European office markets plunged over 9 months, resulting in aggregate take-up achieving only 4.33 million sqm at the end of October. This represents a 39% decrease relative to the same period last year and is the lowest 9-month result since 2009.
Subdued take-up activity
Although volumes were contracting before the outbreak of the pandemic, the lockdown measures imposed everywhere in spring, accelerated the decline.
Prime rental values remained mostly stable across Europe over one year, benefiting from a lack of supply in CBDs. Few changes are expected in prime office rents: only a 1% to 3% decrease may be witnessed by the end of the year. The slowdown of take-up may have more effect on average rents, especially in the districts where the structural vacancy remains high.
Office vacancy was at its lowest level across Europe at the end of 2019. Consequently, most European markets saw a rise in space under construction, leading to expectations of a slight rise in vacancy even without the pandemic. The current crisis may amplify vacancy increases, although it should remain limited in most markets. Indeed, in contrast to 2007, excess construction is not a feature of the market now. Moreover, most city markets today are pre-let led, and the volume of pure speculative schemes remains limited.