Office take-up figures in Q1 2023 have started to significantly diverge in Europe, according to new research from Savills.
Oslo, Prague and Madrid shows increases of 50%, 19% and 5% against the five-year average respectively, while Dublin, Budapest and Lisbon saw a drop of 62%, 57% and 55%, respectively.
The advisor expects to see further bifurcation between prime and non-prime rents, as occupiers opt for more modern offices with appropriate EPC ratings that will be more difficult to meet for lower quality buildings.
Vacancy rates in Europe increased by an average of 50 bps from 7.1% to 7.6% during the past twelve months as some occupiers hold off signing new leases, according to the international real estate advisor. This is most apparent in Dublin (+350 bps to 14.0%), Paris La Défense, (+270 bps to 15.7%) and Budapest (+240 bps to 12.2%). Core vacancy rates remain very low, with Paris CBD (2.4%), Cologne (3.0%), Berlin (3.3%) and Stockholm (4.0%) undersupplied with prime CBD stock.
Analysing the breakdown of vacant space across a sample of European markets, the average level of tenant space available for sublet has remained stable between Q1 2021 and Q1 2023 at 1.2% of total stock.
Georgia Ferris, European Research analyst at Savills, said: 'The occupier shift that we are observing towards more central locations is reflected in the increase in vacancy in La Défense (+270 bps), a predominantly single-use financial hub, and the decrease in vacancy in Paris CBD (-40 bps), a more mixed-use, well connected location. MSCI analysis shows French offices were the top transacted segment in Q1 2023, with Paris CBD prime yields remaining amongst the lowest in Europe.'
Christina Sigliano, EMEA head of Global Occupier Solutions at Savills, added: 'The ongoing strong occupier emphasis on higher-quality space in prime CBD locations and an undersupply of appropriate stock is driving prime European office rents which have increased by 6.3% over the last 12 months. This is particularly apparent in markets such as Cologne, Duesseldorf, Amsterdam, Munich and Prague where prime rents have increased between 13% and 29%.'