Craig Satchwell, Head of EMEA Offices Business Team, at Colliers International, said: “Interestingly, the focus of rental growth in Europe seems to have shifted from east to west.
“In Western Europe, an improved economic outlook and localised shortages of good quality, centrally-located space, resulted in increasing rents in the latter part of 2013. This will certainly continue in the next 12 months.
“In Central and Eastern Europe, the major markets of Moscow and Warsaw have seen a reversal in fortunes. Prime rents in Warsaw fell in mid-2013 due to sustained high levels of construction activity, whilst in Moscow rents started to flatten due to falling economic growth rates and more cautious occupiers.”
The Colliers Office Snapshot (H2 2013) identified the signs of Europe’s North/South risk divide easing. While prime office yields hardened further in “safe-haven” cities such as London, Frankfurt and Berlin, resurging interest in peripheral economies; notably Spain, has contributed with yield compression in both Madrid and Barcelona. In CEE, Moscow was the only major market that saw yield compression over the same period.
Looking Ahead: 2014
According to Colliers Office Snapshot, stabilisation in rental rates and yields is anticipated in 2014. This is a trend likely to be repeated across the largest business centres of Southern Europe (Milan, Madrid, Barcelona and Lisbon), as national economies continue to heal and confidence improves.
The overall picture is increasingly one of yield stability although a tiered European market will undoubtedly remain. In established, safe-haven markets prime yields are already, at or approaching, historical lows so limited change is anticipated in these markets. In markets still grappling with the effects of the Eurozone financial crisis and austerity, recent confirmation of economic improvement and stronger leasing markets appears to have provided two of the crucial conditions necessary for a further hardening in yield pricing.
Bruno Berretta, a senior Research Analyst at Colliers concludes: “Oslo, Copenhagen and Amsterdam are among the only cities where we expect to see some inward movement in yields in the next 12 months.
“Restricted debt availability will continue to act as a drag on pricing and transaction volumes, notably in the more peripheral markets (by location and product). Nonetheless, intrepid investors searching for yield and product are likely to counter-balance this trend.”