JLL names Amsterdam, Stuttgart and Prague as office rental growth hotspots

A lack of office supply will be the main driver of above-average rental growth in European hotspots including Amsterdam, Stuttgart and Prague in the next two years, according to a new report from JLL.

The report - European Office Rental Growth Hotspots 2018 - identifies 10 markets in Europe set to experience supply-led office rental growth outperformance in the next two years.

Amsterdam will see the greatest increase, followed by Stuttgart, Stockholm, Munich, Prague, Barcelona, Edinburgh,Dublin, Utrecht and Warsaw. Just outside the top 10, in the top 15, sit the UK regional office markets of Manchester, Leeds and Birmingham which also offer substantial potential for further rental growth driven by a lack of supply.

Peter Hensby, head of EMEA offices capital markets, JLL, said: 'Investors are facing challenges with record pricing and so for them, finding those income-driven returns is crucial. From our research and our conversations on the ground, we know that office supply – or lack of it – is likely to play an increasingly important role in rental growth over the next few years. So our Supply Sensitivity Index has been developed for investors to show them where they can get that all-important edge in their investments.'
Ones to watch
Submarkets will continue to outperform in 2018 and 2019, as the lack of modern, efficient office supply in traditional central business districts will drive occupiers to second-best areas offering high-quality space.

The report goes into detail on five markets in the top 10 which are supported by structural improvements, differentiators, solid property fundamentals and strong occupier demand:
1.     Amsterdam – South East and Sloterdijk/Teleport
2.     Stuttgart – City Centre & Vaihingen-Mohringen
3.     Stockholm – Solna/Sundbyberg (Arenastaden)
4.     Munich – East (Wierksviertel)
5.     Prague – Prague 1

'Understanding which submarkets will be a short-lived bounce and which are supported by long-term factors will be key to success. Stuttgart and Prague might be surprises to see in the top five, but with vacancy reaching record lows and speculative development limited, all the ingredients are there for some real rental growth in the next couple of years,' added Hensby.


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