The office vacancy rate in the EU-28 has dropped to the lowest level since mid-2010 and now stands at 10.35%, driven by increased demand whilst development levels are still subdued. At the same time office take-up in Europe in Q1 2016 reached its highest first quarter level since 2008 at 3 million sq m. Rents remained stable in the majority of markets, with prime rent rises registered in a handful of cities, according to CBRE’s Q1 EMEA Office MarketView.

Vacancy rates are at their lowest level for six years. Several markets have seen steep declines over the past year. Dublin’s vacancy rate has fallen three percentage points to 7.7%, Amsterdam dropped four percentage points to 12.2%. Berlin, Munich and Madrid have all seen vacancy rates drop by 1.5 percentage points.

Take up in the first quarter of 2016 was up 12% on Q1 2015. Berlin, Munich and Madrid have experienced particularly strong leasing momentum. In each of the markets, take up over the past six months exceeds the previous six month period by 30% or more. The Paris market is also starting to see signs of improvement; in both the large unit category (over 5,000 sq m) and for transactions up to 1,000 sq m. Some of this is “catch up” after a weak 2015, but the pipeline of deals in negotiation indicates scope for further strengthening. The Central Eastern Europe (CEE) markets are more of a mixed picture; with Moscow and Prague showing notable improvement but Warsaw, and to a lesser extent, Budapest recording rather weaker take-up numbers, alongside still-high supply levels.

The EMEA Prime Office Rent Index maintained its steady improvement during the first quarter of the year. The regional index grew by 0.8% compared with the previous quarter. Rents remained stable in the majority of markets, with prime rent rises observed in only a handful of cities. The largest q-on-q change was recorded in St Petersburg, up 7.8%, however due to the impact of sanctions and weak oil prices the market is down 16% y-on-y. Rental increases also took place in Berlin, Birmingham (both up over 6% q-on-q), Dublin (up 4.5%), as well as Stockholm and Barcelona (both up 3.8%).

The European office market remains resilient. Vacancy levels across the region are at a six year low with occupier appetite remaining focused on the CBD, and on high grade stock. This is something we expect to continue, as the out of town stock is often lower grade and tends to offer less appeal in term of amenity and accessibility.  Development levels remain low although some markets that are further advanced in their cycles are starting to see some signs of a pick-up. Paris and the larger German markets are also seeing some signs of an increase in activity. Elsewhere, we are beginning to see landlords undertaking refurbishments on their existing stock to raise their rental profile.
Richard Holberton, Senior Director, EMEA Research