More Positive Signals for European Office Markets

The economic recovery is proceeding at different speeds across the region.  Austerity measures and concerns surrounding sovereign debt in European economies triggered a new wave of economic uncertainty and volatility in financial markets; however there have been more positive signals in the office markets.

Prime rental levels stabilised in the majority of locations in Q2 and the Office Index, based on the weighted performance of 24 markets, increased by 2.6% q-o-q, building upon the growth seen during Q1 and showing the first positive growth (+2.1%) on an annual level since Q3 2008.

Continuing economic recovery has also fed through to European real estate investment, with transaction volumes increasing 19% over the second quarter. After a phase of compression, prime office yields remained broadly stable across Europe in Q2 2010 and prime office capital values increased by 4.3% for Europe on the quarter.

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European Office Property Clock Q2 2010

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Note: This diagram illustrates where Jones Lang LaSalle estimates each prime office market is within its individual rental cycle as at end of June 2010. 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.