Read more about occupier sentiment recovery in our latest snapshot
Our EMEA (12-month rolling) completions index increased +25.3% (y/y) as a total of 6.36mn sqm of new office space completed in 2021. Vacant space continued to climb, but the weighted average vacancy rate is only 7.6%, with 72% of markets below the 10% vacancy threshold. Limited changes in market conditions were recorded - some 44% of markets remain tenant-favourable, and the outlook to Q4 2022 is almost identical at 43% of markets. Headline rental values remained robust over Q4 2021, with 78% of markets indicating stable conditions, albeit many are propped up by incentives. In contrast, 16% of markets recorded rental growth for prime assets in CBD locations against a backdrop of low availability.
Looking forward, net-absorption should accelerate but could be hampered by delays to planned developments amidst rising construction costs. This could amplify supply-demand imbalances as vacancy continues to trend downwards. Our 12-month outlook supports this, highlighting that 58% of markets expect either contractionary (16%) or no movement (42%) in vacancy. Landlord-favourable markets are expected to diminish to 11% over the same period (down from 16% in Q4 2021) as they convert to neutral conditions. This points to 2022 entering a new phase of rebalancing as neutral markets (46%) leapfrog tenant-favourable markets (43%), the latter having held sway over the last 15 months. The flight to quality will continue, with 33% of markets expecting further uplift in prime rents for assets CBD locations over the course of 2022.