Milano, 5 February 2014. Focus of rental growth shifting

In Western Europe, improved economic outlooks and localised shortages of good quality, centrally-located space, has resulted in prime rent increases in London’s key submarkets (West End and City), Amsterdam, and in several German cities (Frankfurt, Hamburg, Munich, Berlin). Improving economic and business confidence looks set to provide a basis for further increases in the next 12 months, particularly in the UK. In contrast, economic uncertainty in France continues to weigh negatively on occupier sentiment and Parisian office rents, which declined marginally.

No increases were observed across Scandinavia, except Oslo. While prime rents continued to soften in Spain in H2 13, a stabilisation in rental rates 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. Interestingly, the focus of rental growth seems to have shifted from the east to west.

In Central and Eastern Europe, the major markets of Moscow and Warsaw have seen a reversal in fortunes in the cities that led rental growth in Europe amid the Eurozone crisis up until end 2012.

Prime rents in Warsaw fell in mid-2013 due to sustained high levels of construction activity, whilst in Moscow rents have started to flatten due to falling economic growth rates and more cautious occupiers. No rental increase is forecast in these markets or the other main commercial centres in the region (Prague, Budapest, Kyiv and Bucharest) over the next 12 months. In some cases, there may be a further mild softening in rents in the year ahead, notably in Prague and perhaps Warsaw.