The third quarter of 2005 has brought a few bright signs over the reduction in the new development pipeline that was seen at the beginning of the year. According to the latest publication by CB Richard Ellis, the development activity in the European office market is over its stagnation period, with the first signs of an upturn.
The trend is particularly evident in Barcelona, as the two year supply is set to be a record high since the end of 2001, and Central London, which is expected to grow on the back of a strong letting market, with a further 720,000 sq m. The EMEA Office Market View for the third quarter of 2005 highlights that, even though the level of new construction has risen notably over the third quarter of 2005, the full upturn may not take place until well into 2006.
Despite a lackluster economic performance pan-Europe, the leasing activity in the office market registered high, contradicting the perception of the third quarter being particularly quiet. Michael Haddock, Director of EMEA Research at CB Richard Ellis, states "The European office market has performed strongly so far in 2005. Relying on the past market performance, the last quarter is usually the strongest in a year, this year's total will exceed the last year's total take-up by some 5-10%."
Kristian Bandy, Analyst at CB Richard Ellis, continues "The sluggish economic performance across Europe restricts the developer confidence to rebound fully. This is particularly true of speculative development, which is not necessarily a bad thing, but rather a balancing out of the oversupply/undersupply factor."
Iryna Pylypchuk, Analyst at CB Richard Ellis, comments "The European office characteristics in this cycle do not follow the highly robust growth in rent/take-up/development patterns, as was seen in the late 90's. The peak of the current cycle is not necessarily anticipated to be lower, but is certainly slower and less correlated between single office locations."
Source: CB Richard Ellis