A report, published on 11 March, 2008, by property international consultants GVA Worldwide, reveals that markets in Central and Eastern Europe, where economic growth is robust, will see stronger rental growth throughout 2008 compared to Western Europe. The report, European Office Market Review Spring 2008, details how commercial investment property markets across Europe have suffered, highlights that occupier markets have remained relatively unscathed and reveals that many major office markets have reported strong rental growth during the last 12 months.
Over the last six months, occupier market fundamentals remain favourable in many cities, such as Warsaw and Moscow, with demand for office space generally strong and the supply of good quality space limited.
As a result, this has led to pressure on rental levels. Moscow in particular has seen very strong rental growth over the last year, with prime rents rising by up to 40% and Warsaw prime rents up by 35%.
On the whole the European Office Market Review Spring 2008 reports that office market fundamentals remain strong in most European countries and expectations are that office rents should continue to rise during 2008, though the pace of this growth will vary. Weaker economic conditions in Western Europe are likely to impact on demand for office space and the pace of rental growth is expected to slow.
Investment activity slowed significantly in many Western European markets during the latter part of the year, due to the tighter credit environment and in particular, secondary markets have seen a greater fall in transaction volumes. In a number of cities yields have started to move out, most notably in London, which has seen the most pronounced adjustment with prime yields in the west end of London at 4.75% and 5.5% in the City of London. In contrast, demand for investment properties in some Central and Eastern European countries remains robust and further yield compression has been evident, for example in Moscow where yields continue to compress and are currently 8%.
Mark Bateman, Director at GVA Grimley said: "The office market across Central and Eastern European cities has clearly benefited from the overall growth of the economy, with increasing demand and take-up of office space, falling vacancy rates and rising rents. For the corporate occupier there are opportunities in Central and Eastern Europe to accelerate profitable, sustainable growth and shareholder value."
GVA Worldwide's European Office Market Review covers: Austria, Belgium, Denmark, France, Germany, Greece, Republic of Ireland, Italy, Netherlands, Poland, Portugal, Romania, Russia, Spain, and United Kingdom.
Click here to read the full report.
Source: GVA Worldwide