According to international real estate advisor Savills the average vacancy rate for the European office market was 9.37% in Q1 2015, which is the lowest level recorded since 2009. The firm predicts vacancy may soon fall to 2007/2008 levels of less than 9.0%.
Savills finds the lowest versus highest vacancy rates continue previous trends with the lowest vacancy rates being recorded in London West End, Berlin and Stockholm at 3.8%, 4.3% and 5.75% respectively. The highest vacancy levels were recorded in Athens, Amsterdam and Warsaw at 18.5%, 16.1% and 13.4% respectively.
The firm reports that scarcity of prime office space in some of the key European CBD locations caused rental growth to slow down slightly from 4% in Q4 2014 to 3.4% in Q1 2015. However, rental growth in prime non-CBD locations where available space is often numerous has surged from 3.4% at the end of last year to 5.8% yoy in Q1 2015.
Non-CBD locations that have benefited from rising demand exhibiting double digit prime rental growth include Vienna, Paris (La Defense) and Berlin at 24.4%, 17.8% and 12.2% respectively.
Eri Mitsostergiou, head of European research at Savills, comments: “With development completions still limited in almost all office locations many European cities appear to be undersupplied. This year is expected to see a 9% drop in development completions. However construction activity is slowly picking up driven by improved financing conditions for speculative schemes and we expect completions to increase by 15% in 2016.”