Prime European office rents are expected to rise 4.9% in 2017 as occupiers continue to focus on the top end of the market, according to Savills research.
Rents in business districts grew 3.3% year-on-year across major European cities in the third quarter, while rents in non-CBD locations rose 1.7%.
Total take-up reached 88m sq ft in the first three quarters of the year, roughly in line with the same period in 2016, and 2% up on the five-year average.
However, with limited supply, take-up has plummeted in certain markets, including Brussels, Belgium, and Paris La Defense, France, where leasing volumes were down 60% and 58% year-on-year.
Alice Marwick, analyst in Savills European research team, said: “While rents in periphery or secondary areas are on average 30% below those in CBDs we’re seeing big corporate tenants choosing to pay more to have a prime building in a strong location, rather than considering cheaper options that may threaten staff retention.
“This has led to landlords having a strong negotiating position with incentives decreasing, but supply will gradually increase towards the back half of 2018, decompressing the tension between supply and demand.”
London’s markets have seen less growth than other parts of Europe. The City is one of just eight markets where 2017 rents are lower than they were at their previous peak.
The West End and the City are also the only two areas where prime office rent-free periods have increased in 2017.
Looking ahead, Savills expected completions to rise by 17% in 2018 and by a further 18% in 2019. With more than a third of this space already prelet, tenants will have to wait between 12-18 months for new or renovated office space.
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