European office space leasing increased by 9% in the second quarter compared to a year earlier, partly due to the strengthening of the financial and insurance sectors as well as returns to work.
Finance-related businesses and banks captured the largest share of leasing activity in the first half of 2024, accounting for 25% of take-up compared with 17% in the same period a year ago, according to a report by brokerage Savills Plc.
According to Bloomberg, Prague, Lisbon, Barcelona, Madrid and the City of London reported demand growth above the five-year average in the first half. While the City of London saw its share of leasing activity jump to 34% from 26%.
The professional and business services sector was the second busiest category, although absorption fell to 22% from 28% in the same period last year.
Office spaces: The role of employees
Office attendance is on the rise across Europe as more businesses encourage their employees with mandates and incentives to return. Three-quarters of companies now adopt a minimum presence policy, according to brokerage firm CBRE Group Inc. helping venue usage rise steadily across the continent.
However, many businesses are shrinking their footprint as they wait for more favorable economic conditions, while a lack of suitable inventory is prompting many tenants to renew their existing leases rather than settle for poorly located premises, said Christina Sigliano, head of EMEA Occupancy Services of Savills. These factors continue to weigh on the commercial real estate sector in Europe, he added to Bloomberg.
European office investment transactions totaled about 14.1 billion euros ($15.7 billion) in the first half, down 21 percent year-on-year as high interest rates continued to limit deals, data from Savills. This amount is reduced by 60% compared to the average of the first half of the five years, which amounts to 36 billion euros. However, the UK supported activity due to faster initial price adjustment and attractive yields for cash buyers.
The premium offices
Average prime office yields in Europe remained flat at 4.9% during the second quarter. Savills told Bloomberg that overall European offices remain at “fair value”, although Oslo and Madrid appear as the most undervalued markets relative to government bond yields.
“Across all markets, there remains a gap in buyer-seller expectations,” said James Burke, director of cross-border investments at Savills. However, “this appears to be closing in gradually as both buyers and sellers adjust their pricing ambitions,” he added.
Source: ot.gr
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