Europe

EMEA ViewPoint: A NEW OFFICE DEVELOPMENT CYCLE ? NOT YET

July 2010

Some recent indicators have suggested a measure of improvement in the European office markets: rents have stabilised, vacancy rates are peaking at lower levels than in some previous cycles and leasing volumes have risen from their mid-2009 lows. This raises the question as to whether these are the early precursors of the next development cycle. Evidence from the development pipelines in the major European markets shows that the absence of new starts will cause a sharp drop in completions next year and that, by 2012, completions will be running at less than half their 2008 peak. Sentiment towards the reactivation of schemes that were mothballed in the early stages of the credit crunch is harder to assess but, other than in London, there is little sign of a shift in developers’ attitudes. There are some isolated examples of renewed interest in development in European markets, but these reflect specific circumstances rather than a broader shift in momentum. Generally, the combination of an uncertain rental outlook and constrained access to development finance mean that the start of the next development cycle is still some way off.

Author(s): several

Source: CB Richard Ellis

Published: 13.07.2010