The market for office space might be due for a boom in Europe. Though the European Union at large has been cash-strapped since the 2008 Great Recession, it seems the tide is turning on at least one front. Findings from global real estate advisor CBRE anticipate a growth in demand for prime office space in European city centers.
CBRE’s Senior Director of EMEA (Europe, Middle East, and Africa) Research, Richard Holberton, noted that the downturn has taken its toll. “It is no secret that in recent years corporate occupiers have been constrained by stringetnt cost management strategies born out of the economic downturn.” But Holberton expects a change of track: “Now, things are changing in line with an improving economic environment, which we expect to have material impact on the office market this year. With grade A space in short supply across Europe… the expectation is that prime rents will move to an upward trajectory in more markets.”
The change would be a welcome one for Europe’s current climate. Despite expectations of growth, Europe’s total office take-up for the first quarter of 2014 has been on par with the first quarters of the previous recession years. However, two major European cities, Madrid and Paris, have seen drastic recent improvement, which may bode well for the rest of Europe. Low-rent office spaces in prime city locations were the key to these cities’ success.
Prague may be next in line for office market growth. Grade A markets are in large supply in the Czech Republic, as it boasts available buildings with suspended ceilings, raised floors, up-to-date heating and cooling systems, abundance of parking spaces, and magnetic card entry systems. The upward trend may be primed to spread to other major European commerce centers.
As demand for office space rises, the rent for available spaces will trend upward. Higher-quality office spaces are in tight supply in most of Europe, and growing occupier confidence along with positive trends in the economy may move major markets into prime rental growth. London has already seen this effect set in, as prime rent has increased by five percent there so far this year.
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