Rents decreased by 8% over the quarter, a fall not witnessed before, according to the Jones Lang LaSalle's Q1 2009 European Office Rental Clock which is based on the performance of 24 key markets.
Moscow saw property rents fall by 28.6% and the decline in London was 21.15, the index shows. Madrid and Warsaw also showed double-digit rental falls at 12.5% and 10.7% respectively over the quarter. Major German cities saw rental corrections of between 2% and 5%, marking their first falls in this cycle.
The report says that office occupiers are increasingly downsizing and making more efficient use of existing space, thus slowing office take-up throughout 2008 and this has resulted in further declines in take-up volumes in the first three months of 2009.
Overall European office leasing volumes reached 1.9 million m², a fall of 37% over the quarter and 31% below the five-year average. The Central and Eastern European markets in particular have been affected by the deteriorating economic conditions and outlook with leasing volumes having 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.
'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,' said Chris Staveley, Head of Jones Lang LaSalle's Cross Border team.
'These market indicators demonstrate that widescale recessionary conditions have arrived to strongly impact the region's occupational markets,' he added.
