The JLL property clock shows little sign of positive rental growth

Average prime rents continue to fall

Although no more cities moved into ‘rents falling’ in Q2, and Paris progressed into the next quadrant, average prime headline rents continue to fall across Europe.

Of the 28 cities monitored, 9 recorded negative rental growth, while 17 remained stable. As a result, the Western Europe weighted average rental index fell by 1.0% in Q2 2002. Despite being a smaller decrease than in Q1 2002 (-2.1%), the year-on-year rate of decline fell from -2.9% in Q1 2002, to -6.3% in Q2.

High levels of churn
Office take-up in Q2 was well above that for the first quarter of 2002, but take-up in the first half of the year was 26% lower than for the same period in 2001. Most markets are currently characterized by high levels of churn (driven by occupiers moving to new office buildings without increasing their space requirements) and we estimate that net absorption has been negative in the first two quarters of 2002.

Vacancy rates continue to increase
Subdued demand and rising completions have seen average office vacancy rates across Western Europe continue to increase, and they now stand at 5.4%, rising from 4.8% in the previous quarter, and 3.1% a year ago. In particular, Hamburg, Munich and the Dutch cities have recorded sharp increases in availability of more than 25% in Q2 compared to Q1 2002.

Central and Eastern Europe
Although take-up in Central & Eastern Europe during Q2 2002 was 12% lower than that in the first quarter, take-up in the first half of 2002 was 4% higher than the same period in 2001. A rise in completions in Q2 2002 caused a marginal increase in the regional average vacancy rate from 11.5% to 11.8%. Prime rents were stable (in local currency terms) in all CEE markets in Q2 2002, except in Moscow where they rose marginally. As a result, Q2 2002 was the seventh consecutive quarter of little or no growth in the CEE weighted average rental index.

Rents are stabilizing in - Paris, Stockholm, Warsaw, Budapest and Prague. Rents are falling in - London, Munich, Dublin, Helsinki, Amsterdam, Hamburg Athens, Madrid, Frankfurt, Berlin and Oslo.

Rental growth slowing in - Edinburgh, Moscow, Milan, Rome, Brussels, Lyon, Lisbon, Antwerp, Luxembourg, Dusseldorf, Copenhagen and Barcelona.

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(source: Jones Lang LaSalle)

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