European occupier markets display signs of cautious optimism

Europe’s economies continue to show signs of beginning an economic recovery. However the time lags between the wider economy and the office occupier markets remains evident. Prime office rents continue their stabilisation started in Q3 across the majority of the European markets, however downward pressures remain present and some markets expect their peak rental falls to come. At a regional scale, the European Prime Office Rental Index based on the weighted performance of 24 markets decreased by 0.8% in Q4 2009, after having seen a similar decline in Q3 2009. Prime office rents across Europe now stand on average 13.6% below the level recorded one year ago and 16.8% below the peak seen in Q2 2008.

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European Office Property Clock Q4 2009

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Notes: This diagram illustrates where Jones Lang LaSalle estimates each prime office market is within its individual rental cycle as at end December 2009. Markets can move around the clock at different speeds and directions. The diagram is a convenient method of comparing the relative position of markets in their rental cycle. Their position is not necessarily representative of investment or development market prospects. Their position refers to prime face rental values. Markets with a “step pattern” of rental growth do not tend to follow conventional cycles and are likely to move between the “hours” of 9 and 12 o’clock only, with 9 o’clock representing a jump in rental levels following a period of stability.