Occupational Overview
According to Colliers International’s latest research, prime rental values for the office sector across the EMEA region are expected to remain flat. However, some of the weaker markets, outside of Europe’s core, will likely continue to see rents fall.

The report points to broad economic stagnation in the region and no imminent solution to the Eurozone crisis, as the main reasons the majority of corporations are taking a cautious approach to any leasing activity.

 Craig Satchwell, head of office agency, EMEA at Colliers International said:

“The fact that the corporate occupiers are tending to put any plans to relocate on hold is counterbalanced by the limited supply of office space in most markets. This is helping to keep rents steady, albeit flat. However, we are expecting increases in rental values in London, Stockholm, Munich and Vienna – areas which enjoy stable GDP growth above national average and/or have good prospects for local labour markets and therefore have stable occupational demand.”

The Colliers report does, however, forecast a decrease in the Swiss market due to poor demand levels; pointing to the strength of the local currency being a key factor impacting tenants’ businesses and leasing activity. Lisbon and Madrid are also expected to experience a further decline in rents as they struggle with difficult economic conditions.

Investment Overview
On the investment side, Colliers predicts that investors will continue to focus their attention on prime assets in prime locations only.

Ewen Hill, director of investment, EMEA at Colliers commented:

“Economic uncertainty and lack of financing for secondary products means that “prime” is still the main focus for investors. We expect the amount of investment transactions to stay at current levels with the lack of quality product acting as a break on demand. Activity will continue to be focused on the UK, Germany, France and the Nordics. Although a revival is also expected in the CEE region in the latter part of the year.”

The report indicates that prime yields across the vast majority of key EMEA centres are to remain stable with low bond yields in the major economies offsetting investors’ concerns with regard to occupational prospects. However, declining occupational demand and negative investor sentiment is likely to push up prime yields in peripheral markets such as Lisbon and Madrid.

Outside of prime, secondary pricing remains unclear and transaction levels low, maintaining a vicious circle of uncertainty for all but the most opportunistic investor.