The latest international overview of 68 office markets in 37 countries across the region from Colliers International indicates how each market is fairing and the picture is mixed.
Major falls in rental levels in Dubai and Moscow, combined with the strengthening of sterling, have put London’s West End once again at the top of the table as the most expensive office market in the region.
With continuing economic troubles throughout the region and weak demand for office space, the vacancy rate across the EMEA region rose to 9.7% by the middle of the year, an increase of almost 2% during the first six months of the year, bringing the EMEA vacancy to its highest level since the end of 2004.
Although the rise in vacancy was felt across the region, it was seen most dramatically in the Baltic States, Ireland, Romania, Turkey, Ukraine, the United Arab Emirates, and the UK A total of eight EMEA cities are now registering vacancy rates of 20% or higher compared with six months ago when the highest vacancy rates were 15%.
‘Although the rising vacancy is reflected across the region, the largest reported increases were in Eastern Europe and the Middle East. Sub-leasing is becoming more widespread in some of the newer markets, which means that the effective vacancy rate is likely to be even higher than has been reported,’ warned Colliers EMEA’s Regional Research Coordinator, Kate Lawler.
Class A rents fell by a further 4.5% in the first half of 2009, following a 6% drop in the second half of 2008. Eastern Europe and the Middle East saw the largest declines, as recent construction booms took their toll in Abu Dhabi and Dubai as well as Moscow, Saint Petersburg and Kiev.
With a few exceptions, markets in Western Europe fared somewhat better in the first half of the year, as rents in Belgium, France, Germany, The Netherlands, Switzerland, the United Kingdom, and the Nordic countries decreased only marginally.
With London the most expensive office market in the region, Class A asking rents in the West End sub-market reached €63 per square meter per month, although generous tenant incentives are keeping headline rents artificially high, the Colliers research shows. After London’s West End come Paris, Dubai, Moscow, and Milan.
The total amount of office space under construction is down 8% from the end of 2008 and 23% from the middle of 2008, evidence that development pipelines have slowed dramatically. Nevertheless, the report suggests that a further increase in vacancy and continuing rental declines are expected over the second half of 2009
