Increasing demand for prime office space across a number of cities in EMEA is causing rents to accelerate, according to global real estate advisor CBRE.
Dublin’s prime office rents are now only just below their pre-crisis levels of 2009 at €538 per sq m per annum. This is set to increase further until supply responds to occupier demand. Similarly, the Berlin office market has reached a 12-year high of €23 per sq m pa as a strong local economy strengthens demand. The London City office market has seen a 3.1% uplift in the last quarter and is nearly 15% higher year-on-year at £67 per sq ft pa.
Illustrative of the strength of demand across the region, the EMEA Prime Office Rent Index (a CBRE benchmark which tracks 41 cities) grew 2.1% year on year as evidenced below.
As well as strengthening economic indicators, demand for prime office space is being driven by several factors including corporate desire to:
- Be located in amenity rich locations to remain competitive on the local and international stage
- Attract and retain the best employees
- Retain proximity to market peers
- Work from the best quality properties
In addition, the supply of new office space across EMEA has been subdued for some time due to low levels of development borne from the global financial crisis. Supply levels tightened further in the second quarter and this too continues to inflate rents and keep them on the upward trajectory.
Looking ahead, the office development response is set to pick-up, albeit slowly and only in certain locations. In CEE, markets such as Bucharest, Warsaw and Moscow have the strongest forecast development completions levels in EMEA. Development activity is also starting to pick up in parts of Western Europe with London Paris, Munich and Dublin forecasting some of the highest two year projections across the region.
Richard Holberton, EMEA Head of Occupier Research, at CBRE explains:
“Office prime rents continue on an upward trajectory due to the current competitive landscape. Companies are vying for the best space which is in short supply in many cities. This is consistent with a broadly positive economic environment and reflected in sharply increased take-up levels. Office development activity is showing some signs of picking up which will help bridge the supply to demand gap, but not immediately. So prime rents will remain on an upward path.”