The majority of major European markets have seen some improvement in take-up levels in 2004. However, given the exceptionally low levels of activity recorded in many markets in 2003, this improvement needs to be considered in context as overall transaction activity remains low by historical standards. However, it is property valuation melbourne anticipated that take-up levels will show further growth in 2005 as confidence returns to corporate occupiers.
The expansion of the EU has added a new dimension to the European office market, providing a new low-cost labor option for the allocation of back-office positions and the outsourcing of business. Whilst it is for the most part secondary office functions being exported to the accession countries at present, it is anticipated that this will impact to some degree on the speed of recovery in some of Europe’s already well-established markets.
Prime rents in London’s West End have made an earlier than anticipated recovery, with rentals of £752 – £860/sq m/year being achieved on the best accommodation in Mayfair/St James’s. This has led to the creation of a two-tier market in the West End with accommodation just off prime and in non-trophy buildings still trading at a significant discount. Rental levels in the City market are likely to remain relatively flat in 2005 as excess supply begins to be absorbed.
Prime rental values have stabilized at around € 675/sq m/year in Paris, although generous incentive packages are still common. Improvements in the occupier market have led to increasing interest in an investment product.
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Investment activity has been robust during 2004 in Central and Eastern Europe. The main focus of investment demand is still principally prime, well located, and well-let product offering long-term and secure income. However, secondary assets are also offering good opportunities for investors who are willing to accept a higher risk. Investment demand has continued to emanate from the German funds. It is anticipated that pension funds and insurance companies will become more active over the coming year.