EuropeÂ's major office markets are, to varying degrees, still feeling the effects of the global economic downturn, with technology and financial services being hit especially hard. According to InsigniaÂ's Midyear 2002 'i on the Market' report, however, many European office markets are showing signs of recovery after a disappointing end to 2001.
According to Robert Riley, managing director of international business at Insignia, 'Whereas markets such as Paris and Brussels have recovered quickly, weak demand and increasing availability continue to be the trend in London, Dublin, Frankfurt, Amsterdam and Madrid. In all but a few select markets across Europe, including Milan, prime rents have continued to fall, and further declines are expected for the remainder of 2002.'
Paris activity, according to midyear 2002 'i on the Market' report: The Paris region office market has seen a distinct upturn in recent months, culminating in a 60% quarter-on-quarter growth in leasing activity. After a strong second quarter compensated for a weak start to the year, leasing for the first half of 2002 reached 8.41 million sq. ft., a 13% increase from the second half of 2001 but significantly below the activity recorded in the first half of 2001.
Office availability in the Paris region continues to rise. More than 21 million sq. ft., or 4.6% of total inventory, was available at midyear, up from 3.5% at the end of 2001. The result is a better balance between supply and demand, which should support prime rents at their current level for the remainder of 2002.
Central London activity, according to midyear 2002 'i on the Market' report:
Central London saw a 20% quarter-on-quarter increase in leasing in the second quarter, bringing total activity for the first half of 2002 to 4.73 million sq. ft., comparable to the second half of last year but well below the level of demand over the first half of 2001. Almost 70% of the office space leased in 2002 has been older space.
Availability across Central London continues to increase, reaching 6.5% at the first quarterÂ's close and 7.5% at midyear. Available supply totals 16.8 million sq. ft., of which the vast majority is older space. Prime West End rents have remained steady at $114.35 per sq. ft. Rents in the City are likely to slip further with rising availability over the next year. City prime rents have fallen slightly to $88.43 per sq. ft., as have prime rents in Midtown - a submarket that primarily comprises the Holborn district - to $73.18 per sq. ft.
Frankfurt and Berlin activity, according to midyear 2002 'i on the Market' report:
Demand for office space in Frankfurt continues to wane. Leasing from January to June totaled 1.8 million sq. ft., well below last yearÂ's 2.8 million sq. ft. leased through midyear. As a result, prime rents have fallen by 10% over the last year. FrankfurtÂ's strong performance in recent years prompted declining availability, from a high of 9.2% in 1995 to a low of 1.8% in June 2001. Weak demand in recent months has since increased availability to 3.5%. Further increases are likely, with approximately 6.0 million sq. ft. of new construction due to come on line later this year. Prime office rents in FrankfurtÂ's CBD closed midyear at $51.10 per sq. ft.
There has also been a drop in demand for office space in GermanyÂ's capital city, Berlin. Activity in the first six months of 2002 totaled slightly more than 2 million sq. ft., a decline of almost 25% from leasing in the second half of 2001. Availability increased for the first time since 1996 to almost 14.0 million sq. ft., or 7.4% of total inventory. The midyear rent level of $30.77 per sq. ft. already represents a slight decline over the past six months.
Brussels activity, according to midyear 2002 'i on the Market' report: The first half of 2002 has seen a quicker-than-expected recovery in the Brussels office market, following a strong decline in demand last year. Leasing activity in 2001 fell significantly on 2000Â's level, totaling only 5.7 million sq. ft. This ye