The tightest markets in terms of vacancy levels are Berlin and Paris CBD with a 1.5% vacancy rate. On a quarterly basis Stockholm and Prague experienced the steepest decreases of available space, from 4% to 2.6% and from 5.1% to 4.3%, respectively. The most significant annual changes were noted in Lisbon (from 8.3% to 6%) and Barcelona (from 7.0% to 5.1%).
This reflects a low supply reserve across Europe’s markets (the ratio of available space over a three-year take-up average), which corresponds to less than a year’s take-up and ranges from about four months in Berlin and Prague to 27 and 29 months in Madrid and Brussels (see graph below).
Brussels (189%), Dublin (111%) and Barcelona (50%) showed the strongest annual rises in office space take up in Q1 2019 amongst Europe’s biggest cities, says Savills. The most significant drops were noted in Frankfurt (-37%), Warsaw (-29%) and Paris La Défense (-26%) but remain above long term averages and need to be considered in light of strong activity last year.
Eri Mitsostergiou, Director, European Research, Savills, says: “The record low vacancy rate across Europe is projected to rise only slightly by the end of 2019. Most markets will continue to see their availability falling or stabilising. A rise in vacancy rate is projected in Amsterdam (from 5.3% to 6.5%), Stockholm (from 4.0% to 5.0%), City of London (from 5.3% to 6.0%) and Paris La Défense (from 4.6% to 5.2%).
“Ongoing strong demand combined with tight supply continues to press rents upwards. Prime rents increased by 5.1% yoy in the CBD and 1.9% in non-CBD locations. Cologne (13.7%), Berlin (10.1%) and Barcelona (12.5%) all registered double digit annual growth while London rebounded strongly in the first quarter of the year with a 26.5% quarterly rise. For prime non-CBD rents we also noted a significant rise in Berlin (15.9% yoy) and strong recoveries in Barcelona (15%), Madrid (10.6%) and Athens (9.1%).”
Matthew Fitzgerald, Director, Cross Border Tenant Advisory, Savills, says: “While completion of buildings scheduled for 2019 and 2020 are expected to offer more choice to tenants, we do not expect a significant upswing in Grade A supply or in vacancy rate, as about 45% of this space is already committed. There is approximately 10m sq m under construction (2019 and 2020 pipeline), which can satisfy about 12 months of demand and corresponds to 4% of stock.
“Given that workplace location is core to the attraction and retention of talent, competition for the best buildings is set to continue throughout the rest of the year. As a result tenants need a business plan further ahead and might also want to consider flexible solutions.”