Media and tech firms drive European office demand

The proportion of office space taken up by technology, media and telecoms (TMT) companies across the European office market now stands at 17%, an increase of 2% year-on-year (yoy), according to data from Savills.

At the same time, prime central business district rents have increased by 5.1% yoy in Europe, as historically low vacancy rates meet rising take-up figures.

'The share of ICT companies is increasing in most of the cities we have analysed,' said Mike Barnes, associate in Savills European research team.

'It is clear that such trends are affecting the respective office markets and that landlords must keep pace with the changing business demands of the sector, such as the highest quality of internet connectivity and the provision of flexible office space, in order to stay profitable and ensure continued occupancy of their office spaces,' Barnes added.

European hotspots
Information and communications technology (ICT) firms accounted for 160,000 m2 (46%) of H1 2019’s take-up in Dublin. Even if 2018’s Facebook deal is excluded, the amount of space being taken by ICT firms has been trending strongly upwards in the Irish capital, Savills said. This is also true for ICT firms’ share of total take-up, which has been increasing.

Similarly, in Berlin, ICT firms have taken 45,300 m2 in Q1 2019 alone, following from 219,600 m2 for the full year in 2016, 364,500 m2 in 2017 and 209,300 m2 in 2018 according to Savills data. While take-up volumes have dropped slightly between 2017 and 2018, this is due to a lack of supply and therefore absorption rates still remain high.

Owing to Berlin’s low vacancy rate (1.5%) and the 70% pre-let status for 2019, more than 50% of the pipeline (1.8m m2) for the next two years is also already pre-let, Savills noted.

In Paris, Q1 2019 saw one of the ‘Big Four’ tech companies sign a lease for over 5,600 m2 in Paris Centre West and several deals struck with co-working operators. Furthermore, another Big Four tech firm is about to sign a lease in the CBD of Paris soon.

Similar recent deals in Amsterdam involve Perform Group/DAZN taking 3,000 m2 in the city centre, Snapchat signing a new long-term office lease agreement and cloud computing software company Nutanix taking out 3,500 m2 of office space in Hoofddorp.

Growth dynamics
Matthew Fitzgerald, director, European cross border tenant advisory at Savills, says: 'The global technology industry continues to grow and so we should not be surprised that its requirement for office space in European office locations is rising.

'The reason for levels of take up declining is not due to a reduction in demand but in most cases because of a lack of supply. This is demonstrated in the fact that net absorption rates for office space are relatively unchanged. Meaning that while take up numbers may have fallen, as a proportion of supply, they are fairly stable.'

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