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News Release

Dublin

Signs Point to Increased Rental Growth Across European Office Markets

According to Jones Lang LaSalle’s Quarter 1 2011 European Office Clock


Jones Lang LaSalle’s latest research reveals that prime rents across Europe grew modestly over quarter one 2011 (Q1 2011) though differences remain across markets.  Jones Lang LaSalle’s European Office Rental Index increased by 1.5 percent over the first three months of the year however this increase was nearly entirely driven by continued rental growth in London’s West End (+4.6 percent) and Moscow (+17.6 percent) with Lyon (+4.2 percent) and Dusseldorf (+2.2 percent) being the only two other index markets to experience rental growth.
 
The debt problems in Spain, Portugal and Ireland continued to be a drag on rents in these economies; Spain’s office markets again experienced rental declines over the quarter (Madrid -0.9 percent and Barcelona -1.3 percent) and together with Dublin and Lisbon, where rents remained stable, Jones Lang LaSalle expect rents to soften further before reaching the bottom of the cycle in 2012.  In addition the performance differential between prime space and secondary space persists in many markets.
 
Bill Page, Head of EMEA Office Research at Jones Lang LaSalle, “Office demand is generally still being driven by lease events and consolidation, but there are signs of increased occupier optimism particularly in the Nordics, Germany and France. Looking ahead, we expect greater expansionary demand, but fiscal tightening continues to undermine confidence in countries such as Spain, Greece, Portugal and Ireland. In addition, unemployment in the European Union is only just starting to decline, although significant regional differences remain.”

Fionnuala O'Buachalla,  Director at Jones Lang LaSalle Ireland - "The uncertainty surrounding the possible introduction of a ban on upward only rent reviews in all existing leases is further undermining confidence by existing and potential new Landlords in the Irish market whilst occupiers wait with baited breath".

Nine European office markets showed an increase in vacancy rates with the biggest rise recorded in Rotterdam (+170 bps) and a rise of 50 bps witnessed in Amsterdam in Budapest. However vacancy rates also fell in 15 markets with the biggest fall recorded in Dublin (-120 bps). The European vacancy rate was marginally up by 10 bps up at 10.3 percent over the quarter and vacancy in Western Europe and the CEE remained nearly unchanged on an aggregated level.  In many markets, the vacancy rate for good quality office space is low, and this continues to drive prime rental stabilisation or growth.  Overall, the supply of second hand space is high and available at a significant discount to prime.

Deirdre Costello,  Director at Jones Lang LaSalle Ireland - "This is the first time that the Dublin market has seen a reduction in the vacancy rate in almost 3 years. Whilst it is still high, we are hopeful that it will reduce below 20% before the year end".
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