Prime Office Rents Q1 2008

The European Office Rental Index based on the weighted performance of twenty four markets increased by 1.0% over the quarter with prime rents now standing 8.9% higher than one year ago. Only six cities reported rental growth, led by Milan with +14% and Warsaw with +10% over the quarter. Dublin has the fifth highest rents in Europe.

Jones Lang LaSalle says that with the exception of Brussels, where rents decreased by 1.7%, all other markets witnessed stable rents. Over the last twelve months however rental growth was particularly strong in Warsaw (+32%), Moscow (+31%), Budapest (+19%) and London (+18%). At the end of March 2008 the majority of the markets on the European Office Clock reached the “Rental growth slowing” quarter. Whilst the rental outlook for Western Europe for 2008 is subdued, rental growth expectations for the CEE (Central and East European) markets are still very positive.

Prime office rents in Dublin showed no change over the quarter or over the year and were the fifth highest in Europe, at €646 per sq m  per annum,  coming after London’s West End, Moscow, London’s City and Paris.

Deirdre Costello, office agency director with Jones Lang LaSalle in Dublin, commented: “The office clock for Dublin shows that the rate of rental growth is slowing in the light of a more difficult economic climate which will filter through to occupational demand.  There is however still reasonably strong activity in the office leasing sector with companies like Deloitte, Citco, KPMG and Bank of Ireland all looking for headquarter accommodation in the city.  Prime rental levels had, in exceptional circumstances reached and exceeded €60 per sq ft for prime office accommodation late 2007 and we do not forecast any additional growth beyond that level.'”

Alastair Hughes, CEO EMEA at Jones Lang LaSalle, commented:"Demand for office space remained at healthy levels, although prime rental growth continued to slow in the first quarter due to the diminishing economic outlook."

Jones Lang LaSalle said that the European Office Rental Index based on the weighted performance of twenty four markets1 increased by 1.0% over the quarter with prime rents now standing 8.9% higher than one year ago. Only six cities reported rental growth, led by
Milan with +14% and Warsaw with +10% over the quarter.

With the exception of Brussels, where rents decreased by 1.7%, all other markets witnessed stable rents. Over the last twelve months however rental growth was particularly strong in Warsaw (+32%), Moscow (+31%), Budapest (+19%) and London (+18%). At the end of March 2008 the majority of the markets on the European Office Clock reached the “Rental growth slowing” quarter. Whilst the rental outlook for Western Europe for 2008 is subdued, rental growth expectations for the CEE markets are still very positive.

Driven by positive net absorption and moderate completion volumes, the European average vacancy rate fell a further 20bp over the quarter to 7.1%. The vacancy rates across the European markets now range between 2.4% in Warsaw and 12.9% in Frankfurt. In 13 of the 24 cities the vacancy rate is below the European average, including the major markets London (3.8%), Moscow (4.7%), Paris (5.0%) and Madrid (3.7%). Over the quarter the largest falls were reported in Budapest (-140bp), Frankfurt (-80bp) and Warsaw (-70bp), whilst vacancy rates significantly increased in Dublin (+100bp), Barcelona (+90bp) and Luxembourg (+50bp).