| Dublin has highest vacant office rate in Europe at 17.7 p.c., but is just one of 2 cities where trend is down |
Back |
| Although Dublin has the highest office vacancy rate in Europe, ahead of Stockholm and Budapest, it is one of only two cities in which the rate declined in Q3 according to the Jones Long LaSalle office clock, which illustrates short-term trends in prime face rental values in the prime location within each market. |
MMain points:
• Our prime office rental index for Western Europe1 fell 2.1 per cent in Q3 2003. This brought the decline for the year-to-date to 5.7 per cent, with prime office rents 7.0 per cent lower than a year previously and 16.1 per cent below the Q3 2001 peak. During the quarter Milan and Lyon recorded their first rental declines in the current cycle while rents also fell in Barcelona, Dublin, D?sseldorf, Frankfurt, Hamburg, London, Madrid, Munich and Stockholm. Rents were unchanged in all other cities.
• Few companies are expanding and cost remains a key issue for occupiers. In the first nine months of 2003 leasing volumes were 9 per cent below the same period in 2002 and 18 per cent lower quarter-on-quarter. During the first three quarters of 2003 only Brussels, Luxembourg and Madrid registered take-up above that for the same period in 2002.
• The European average vacancy rate for the index cities rose to 9.0 per cent in Q3 - up from 7.1 per cent at the end of 2002. Barcelona, D?sseldorf, Frankfurt, London, Munich and Paris all recorded increases in vacant space of more than 10 per cent during the quarter.
• In Central & Eastern Europe the index of prime office rents fell by 0.7 per cent in Q3 2003. Prime rents fell for a third consecutive quarter in Warsaw (by 3.8 per cent), offsetting a small 0.9 per cent increase in Moscow, while prime rents were unchanged in Prague and Budapest. At a regional level occupier demand in Central & Eastern Europe remains stable and in the first nine months of 2003 it was 5 per cent above the same period in 2002. This remains driven by strong take-up in Moscow, as Budapest and Warsaw both recorded take-up below 2002 levels. During the quarter the regional vacancy rate rose from 11.0 per cent to 11.5 per cent.
Market-by-market commentaryRents
Milan: During the quarter Milan registered its first decline in prime office rents of the current cycle, falling by 5.1 per cent. Although take-up in Q3 was 9 per cent above that recorded in Q2, take-up in the year-to-date has been 50 per cent below the same period in 2002. The vacancy rate rose marginally to 6.2 per cent in Q3 (up from 6.1 per cent in Q2).
Rome Having declined by 3.5 per cent in Q2 2003, prime office rents remained unchanged in Q3. Limited construction activity has kept vacancy levels broadly stable since the beginning of the year.
Barcelona: Prime office rents registered their third consecutive quarterly decline of the current cycle in Q3 2003, falling by 2.5 per cent. Prime rents are now 9.6 per cent below their peak in this cycle. Take-up levels for the first nine months of 2003 were 26 per cent below those for the same period in 2002 and the vacancy rate rose from 5.8 per cent in Q2 2003 to 6.9 per cent in Q3.
Amsterdam/Randstad: Prime office rents were stable for a third consecutive quarter in Amsterdam in Q3 2003 and also unchanged in Rotterdam, The Hague and Utrecht. With the exception of The Hague, take-up was lower in Q3 than in the previous quarter while in the first nine months of 2003 all cities recorded take-up below the same period in 2002. During the quarter the vacancy rate rose to 12.1 per cent in Amsterdam (11.2 per cent in Q2), 6.8 per cent in Rotterdam (5.8 per cent in Q2), 6.4 per cent in The Hague (5.7 per cent in Q2) and 8.9 per cent in Utrecht (8.8 per cent in Q2).
Munich: Take-up was 8 per cent higher quarter-on-quarter in Q3 2003, but take-up for the first nine months of the year has been 18 per cent below the same period in 2002. The vacancy rate rose from 6.8 per cent to 7.5 per cent during the quarter while prime office rents fell for a second consecutive quarter in Q3, declining by 3.2 per cent and increasing the annual rate of rental decline from -3.1 per cent to –6.3 per cent.
London: Prime office rents in the West End fell for a sixth consecutive quarter in Q3 2003, declining 2.0 per cent. Prime rents have now fallen 26.5 per cent since their peak in 2001 and 13.8 per cent year-on-year. Although 16 per cent up on the previous quarter, take-up in central London for the year-to-date has been 11 per cent below the same period in 2002, and the vacancy rate increased from 9.9 per cent in Q2 to 10.6 per cent.
Dublin Having remained stable for two consecutive quarters, prime office rents fell 5.5 per cent in Q3 2003, increasing the annual rate of rental decline from –3.4 per cent to –8.7 per cent. Nevertheless, some tenants are prepared to accept higher rents for more flexible lease terms. Rent-free periods have remained stable. There are currently few new open market lettings and in Q3 take-up was 28 per cent lower than in Q2. In the year-to-date take-up has been only 6 per cent below the same period in 2002. The vacancy rate continued to decline from its peak of 18.4 per cent (Q4 2002) and stood at 17.7 per cent at the end of Q3 2003.
Frankfurt: Prime office rents in Frankfurt fell 6.5 per cent in Q3 2003, their seventh quarterly decline this cycle. Prime rents are now 29.6 per cent below their 2001 peak. The vacancy rate rose sharply in Q3, from10.4 per cent in Q2 to 13.8 per cent. However, take-up has been more robust than expected and for Q3 was in line with the previous quarter. For the year-to-date take-up has been only 3 per cent below the same period last year.
Madrid: Despite take-up in Q3 2003 some 40 per cent below that recorded in Q2, for the year-to-date it was 49 per cent above that for the same period in 2002. Prime office rents fell for the eighth consecutive quarter in Q3 2003, falling by 4.5 per cent while the vacancy rate rose from 6.6 per cent to 7.0 per cent during the quarter.
Paris: Despite a significant increase in incentives, prime office rents were stable in Q3 2003, having declined by 5.7 per cent in the first half of the year. Take-up for the City & Inner Suburbs was 24 per cent lower quarter-on-quarter but only 7 per cent lower in the year-to-date compared to 2002. The City & Inner Suburbs vacancy rate increased from 6.2 per cent to 6.9 per cent during the quarter. The regional rate, including the Outer Suburbs, rose from 6.0 per cent to 6.2 per cent.
Berlin: Take-up in Berlin for the year-to-date has been 18 per cent below that recorded in the same period of 2002. This contributed to an increase in the vacancy rate, from 8.6 per cent in Q2 2003 to 9.1 per cent in Q3. Prime office rents were stable for a second consecutive quarter in Q3 2003 and, although rents remain 28.4 per cent below their 2001 peak, the annual rate of rental decline eased from –15.4 per cent to -12.0 per cent.
Warsaw: Prime rents fell for a third consecutive quarter in Warsaw (by 3.8 per cent), bringing the decline for theyear-to-date to –10.7 per cent. Although take-up of 64,780 m2 in Q3 2003 was 30 per cent higher than that for Q2, for the first nine months of 2003 take-up was 11 per cent below that for the same period last year. Despite a strong third quarter, the level of completions in 2003 so far is almost 50 per cent less than in the same period last year, and since Q3 2002 the vacancy rate has gradually fallen from 16.6 per cent to 15.9 per cent.ecline Easing
Hamburg: Following three quarters of stability, prime office rents fell 2.4 per cent in Q3 2003. Prime rents have now fallen 30.1 per cent since their 2001 peak. Although take-up for the quarter was nearly half that for Q2 2003, in the year-to-date it has only been 8 per cent below the same period in 2002, and the vacancy rate rose only slightly to 7.7 per cent (up from 7.6 per cent in the previous quarter).
Stockholm: Companies remain cost driven and continue their consolidation activity. Take-up for the first nine months of 2003 was 39 per cent below the same period in 2002, contributing to an increase in the overall vacancy rate from 16.1 per cent to 17.0 per cent. Prime office rents fell by 2.6 per cent during Q3 2003 and the year-on-year rate of decline remained broadly stable at -11.6 per cent. Nevertheless the gap in rents between modern, efficient space and older space has continued to increase.
Budapest: A high level of speculative completions in Q3 2003 led to a slight increase in the vacancy rate from 16.0 per cent to 16.6 per cent. The prime rent was stable for the eleventh consecutive quarter. Stronger leasing activity in Q3 2003 brought take-up in 2003 so far to 97,000 m?, 11 per cent down on the same period in 2002. Occupiers continue to be driven by cost and location and incentives remained stable during the quarter.
Prague: Strong leasing activity continued in Q3 2003 with take-up 7 per cent above the same period in 2002. Despite this, the vacancy rate has increased from below 10.0 per cent in Q2 2003 to 11.8 per cent at the end of Q3. The prime rent was stable for the thirteenth consecutive quarter in Q3 2003.
Brussels: Having increased by 10.9 per cent in Q2 2003, prime office rents remained stable in Q3. Nevertheless, rents remain under upward pressure with asking rents some 4 per cent to 7 per cent above prime levels. Although take-up was 19 per cent lower quarter-on-quarter, in the year-to-date take-up has been some 21 per cent above the same period last year. The overall vacancy rate edged up from 9.7 per cent in Q2 2003 to 9.8 per cent in Q3.
Moscow: Prime office rents registered a small increase of 0.9 per cent in Moscow in Q3 2003 and take-up for the first nine months of the year was 22 per cent above that for the same period in 2002. The continuing high demand, combined with the shortage of prime office space is expected to maintain the upward pressure on rents. The vacancy rate edged up from 5.0 per cent in Q2 2003 to 5.3 per cent in Q3.
Copenhagen: No new construction was completed in Q3, and there remains very little speculative activity. The vacancy rate increased to 9.0 per cent (up from 8.7 per cent in Q2 2003), including some vacancies in new schemes. Prime office rents were stable for a fourth consecutive quarter.
Further information is available from Dr Clare McParland at Dublin 673 1600 or Alistair Seaton at London (0)20 7399 5290 |
|
| Article appeared in the December 2003 issue.
|
|
|
