Colliers reports a mixed year for prime rents across Europe's major office centers, but prime rents are set to broadly stabilize in 2011 and centers such as Berlin, London, Stockholm and Warsaw are expected to see notable growth in prime rents.
Despite sovereign debt concerns dominating the front pages in 2010, Europe, by and large, experienced a resumption of economic growth during the year. There was of course a strong disparity between Germany, which saw very strong growth over the year, and those countries around the periphery with concerns regarding the sustainability of their public finances.
Improved economic performance did not, however, transfer into notable increases in occupational demand. Of the 25 major office centers examined in the report, a number were still reporting prime rental falls in the latter half of the year. London (City and West End) and Paris (CBD) being the obvious exceptions, with both seeing strong prime rental growth in 2010.
Mark McAlister, Colliers Head of City Agency, said: "London has shown true resilience in the face of the financial crisis and demonstrated it's global credentials. Businesses and investors continue to see it as a comparatively stable environment in which to house operations and safeguard capital. As such take-up of offices has improved in 2010, with positive rental growth witnessed in the City and West End."
On the investment side, most of the major centers witnessed yield compression over 2010 as investors priced in healthier long-term expectations the threat of sovereign debt defaults seemingly retreating in the latter half of the year.
Looking ahead, based on an assumption of steady economic growth, we expect prime rents to be broadly stable over most of the 25 major centers in 2011. Berlin, London, Stockholm and Warsaw are likely to be the top performers in terms of generating prime rental growth.