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Recovery of the European office sector continues, but at variable pace reports Jones Lang LaSalle
In its latest European Property Clock for Q2 2013, Jones Lang LaSalle report that in Europe, prime office rents continue to recover overall.
Market conditions in Dublin remain steady, with improvements in rents and occupier activity highlighting continued recovery for the sector. In the year-to-date, take-up (691,684 sq.ft.) is greater than the same point last year by 5% and there was an 11% increase in the number of enquiries in Q2 compared to Q1. With 735,000 sq.ft. of space reserved for next quarter, year-end volumes for 2013 are expected to be in the region of 1.5 – 1.6m sq.ft. Supply remains high at 18.9% but is tighter in prime locations, where there is limited availability of prime quality space. With no new office construction since 2010, prime supply is expected to continue to tighten with limited choice for occupiers with specific size requirements. Competition for buildings has caused rental value increases for the second consecutive quarter, and prime rents now stand at €30 - €35 per sq.ft. Despite the rental increase, Dublin rents remain competitive compared to other cities across Europe, and are still significantly lower than the peak. The European Prime Office Rental Index increased by 0.2% over the quarter but remains in negative territory (-0.7%) compared with a year ago. Jones Lang LaSalle forecast only moderate rental growth for the remainder of the year. The aggregate numbers however disguise the diverse picture across the region with markets in all four quadrants of the Office Clock, mirroring the mixed economic conditions across the region:• Over the quarter, prime office rents in Dublin continued to recover from their historic lows, increasing by +9.4%. • Rental declines were recorded in Lyon (-5.3%), Budapest (-2.5%), Warsaw (-2.0%), and in Barcelona (-1.4%).• Prime office rents in both London’s West End and the City remained unchanged at £1,049 / € 1,225 and £614 / €716 sqm pa respectively. However, the growth outlook remains strong. • Prime rents in Europe’s biggest market Paris remained stable, too, though the current economic headwinds are likely to take their toll on the short term outlook.