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Significant office rental and take-up declines across Europe

The Index is based on the performance of 24 markets, and highlights that prime rents decreased in the majority of the markets, led by Moscow and London (down -28.6% and -21.1 respectively), though Madrid (-12.5%) and Warsaw (-10.7%) also showed double-digit rental falls over the quarter, whilst the major German cities saw rental corrections of between 2% and 5%, marking their first falls in this cycle.

As office occupiers have increasingly downsized and made more efficient use of existing space, office take-up has slowed throughout 2008 and resulted in further declines in take-up volumes in the first three months of 2009. Overall European office leasing volumes reached 1.9 million sq m (20.5 million sq ft), a fall of 37% over the quarter (-40% to Q1 2008) and 31% below the five-year average.

The Central and Eastern European (CEE) markets in particular have been affected by the deteriorating economic conditions and outlook: leasing volumes decreased over the quarter by -41%. In western Europe, substantial falls in take-up have been recorded in Utrecht (-82%) and Dublin (-71%), but large markets like London (-65%), Madrid (-56%), Munich (-44%), and Paris (-23%) also saw significantly lower activity in Q1 2009 compared to the first three months in 2008.

Weak demand and completions of more than 2 million sq m (21 million sq ft) in Q1 caused the overall European vacancy rate to increase from 7.7% in Q4 2008 to 8.5% over the quarter. Driven by high completion levels in Moscow the aggregated CEE vacancy rate jumped to 13.6% in Q1 09 from 4.9% a year ago.

Vacancy rates in Europe vary now between 2.4% in Luxembourg and 18.5% in Dublin.  

Commenting on the Q1 Clock, Chris Staveley, Head of Jones Lang LaSalle's Cross Border team commented: "Many office projects have been cancelled or postponed in recent months; however the dramatic slowdown in office take-up is putting increased pressure on prime rental levels. These market indicators demonstrate that widescale recessionary conditions have arrived to strongly impact the region's occupational markets."