Up to 20% office rental growth forecast for some European cities (EUR)

Office rental growth in Luxembourg will exceed 20% by year end 2010 with London's City and West End set for over 10% growth, as well as Istanbul and Prague at approximately 8% and 5%. This is according to international real estate advisor Savills.

The report suggests that average annual CBD rental growth will reach nearly 0% across Europe by the end of 2010 from current levels of -9% with key locations experiencing positive rental growth. This will follow a period of rental falls over the next six months for as much as 33% of locations surveyed, whist 57% of locations are set to stabilize.

Lydia Brissy, associate director of Savills European research, says: "Take-up picked up in most locations during the second half of 2009, with strong figures emerging during the final quarter. Thanks to restricted development, rents started to stabilize and even increased in few European cities. This trend should spread to most locations during 2010."

Despite a decline in development activity, availability has risen over the course of 2009 in many cities due to recent office completions. Savills forecasts that these completions will increase supply in as much as 60% of CBD locations during the next six months before average vacancy rates begin to stabilise. Nevertheless, the increase in office supply has allowed tenants the opportunity to cut costs of office accommodation and is reflected in an 18% increase in take up comparing H109 to H209, with a further surge in leasing activity of 25% between Q309 and Q409. Key locations which have shown dramatic take up of over 100% during H209 are London City, Manchester and Lisbon.

Source: Ssavills

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