According to IVG there is optimism in the office markets: The figures of the IVG Real Estate Barometer, 4th quarter 2005 indicate a recovery of the European office markets.
Optimism in the office market: turnovers and rents increase
The rental turnovers increased noticeably in the major European office markets. Prime rents also increased. Vacancy rates fell, particularly in the Eastern European cities. These are the core statements of IVG Immobilien AG and Cushman & Wakefield Healey & Baker's Real Estate Barometer for the fourth quarter of 2005. "It is good news that there was an increased demand for office space in nearly all locations in 2005 - even more than 10% in some places", says Bernd Kottmann, Member of the Board of Directors with responsibility for Portfolio Management at IVG. Space turnover fell slightly in only six out of the 21 cities studied. "As long as there is no significant increase in the number of new office jobs created, vacancy rates will remain high. We will have to get used to US conditions here", says Kottmann. "Modern and efficient buildings in good locations have very good rental prospects. Marketing older properties will continue to be difficult in the future."
Almost 9 million m rented space
8.9 million m were rented in 2005, 9% up on 2004. In the
three Eastern European cities Budapest (236,000 m), Prague (180,000 m) and Warsaw (373,000 m), this increase was 10%. The Western European markets were up 8.7% to 8.1 million m. The strongest increase in space turnover was in the Brussels office market, rising by 48.3% to 672,000 m and nearing the 2003 record of 723,000 m again. Frankfurt increased by 41% to 479,000 m and Vienna by 33% to 345,000 m. Rentals fell in Dusseldorf (down 7.4%), Hamburg (down 8%), Lisbon (down 9.2%), London (down 9.9%), Madrid (down 3.9%) and Rome (down 10.1%). With a rental volume of over two million m, Paris has the clear lead again, followed by London with 774,000 m. Madrid is in third position with 685,000 m.
Falling vacancy rates
The vacancy rate in Western Europe is half a percentage point lower than the fourth quarter of 2004 at 9%. However, it has declined considerably in the EU accession countries in Central Europe: from 14 to 10.8%. Amsterdam continues to have the highest vacancy rate at 21% (up 1%). Dusseldorf experienced the strongest increase: the vacancy rate rose from 10.8% to 11.9% within a year. The vacancy rate increased slightly in four other cities. However, the number of vacant offices fell in thirteen cities. The biggest decreases were in Budapest and Warsaw by exactly 3.6 percent points and Prague by 2.2%.
Slight increase in prime rents
The increase in prime rents remained considerably lower than the growth rate in the rental volume at an average of 3.9% of in 21 cities. In Eastern Europe, the increase was 1.6% lower than in Western Europe. The values developed in different ways: prime rents in Warsaw fell by 5.6%, rose by 8.8% in Budapest and remained unchanged in Prague. The biggest decline in prime rent was in Brussels, falling by 17% despite the highest increase in rental volume. The biggest increase in prime rent was in Milan at 11.2%, rising by 8.8% in Paris, 7.1% in Zurich and by 6.4% in Helsinki.> Office users in London and Paris once again had the highest rents at €104.40 and €56.70 per m per month. Milan (€41.70), Zurich (€37.50) and Stockholm (€35.50) were also expensive. The lowest priced spaces are in Warsaw (€17), Vienna (€18), Budapest and Prague (€18.50). There was a higher increase in the average rent than in the prime rent in 2005: by 6.6%. However, Eastern Europe demonstrated a decrease of 1.2% here, whilst the Western European cities became 6.9% more expensive. London also has the highest average office rent at €65.30, followed by Paris at €41.20. The lowest priced are Berlin and Vienna at around €11.50.
German office markets offer higher yields
Investments in the top five German office locations of Berlin, Hamburg, Mun