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EMEA Office Snapshot Q1 2022

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EMEA’s take-up upward trajectory continued over Q1 with (12-month rolling) activity up +40.5% year-on-year (y/y), enabling net absorption to rise 72 basis points (bps) above the bottom of the market witnessed in Q1 2021. Improving occupier sentiment is feeding through into strong pre-letting activity, a resurgence of larger deals and improving occupancy rates. However, despite a strong year-end rally that carried over into Q1, 62% of markets remain below their 5-year par.

Our EMEA (12-month rolling) completions index increased +20.6% (y/y), but with demand still recovering, vacant space, unsurprisingly, continued to climb: now +37.4% ahead of pre-pandemic levels. Still, EMEA’s weighted average vacancy rate is 7.5%, moving from 7.6% at year-end, with 58% of markets below the 10% vacancy threshold. Limited changes in market conditions were recorded - 43% of markets remain tenant-favourable, and the outlook to Q1 2023 is almost identical (41%). Headline rental values remained robust over Q1 2022, with 59% of markets indicating stable conditions, albeit incentives continue to prop up many markets. In contrast, some 36% 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 67% of markets expect either contractionary (24%) or no movement (43%) in vacancy. Landlord-favourable markets are expected to diminish to 15% over the same period as they convert to neutral conditions. This points to 2022 entering a new phase of rebalancing as neutral markets (44%) leapfrog tenant-favourable markets (41%), the latter having held sway over the last 18 months. The ‘flight to quality’ will continue, with 47% of markets expecting further uplift in prime rents for assets CBD locations over the next 12 months.
 

EMEA Office Snapshot Q1 2022

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Damian Harrington

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Damian Harrington is a Director and Head of Research for both Global Capital Markets and EMEA at Colliers. He has over 20 years of experience in the real estate industry living and working from various locations across EMEA including London, Dubai, Prague, Helsinki and Amsterdam. Damian is responsible for producing research for internal and external clients. His expertise helps to provide clients with global capital market trends and analysis, and connects them with strategic and actionable insights, such as the changing nature of global capital and the impact on global capital flows. Damian has produced numerous research papers and generated analysis of markets across all asset types - from residential to offices, retail to logistics and hotels to niche sectors such as life sciences, air cargo and data centres. Damian is a member of the EMEA location strategy team and a key member of Colliers ESG focus group.  He speaks regularly at internal global conferences, external industry events hosted by GRI, ULI and other key industry bodies, plus key annual events such as MIPIM and EXPO REAL.

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Peter Leyburn

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Peter is Head of Enterprise Clients, Occupier Services EMEA. He is focussed on ensuring Colliers' Occupier Services enterprise clients are receiving best-in-class solutions to manage their organisations and portfolios.

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