Q3 office take-up in London strongest since beginning of the year

Office take-up in London and Paris soared by 26% and 46% respectively in the third quarter of 2011 as office leasing transaction levels hit a 2011 peak, according to CBRE. Despite the weakening economic outlook, occupier demand across European office markets remained roughly stable compared to the same period last year.

During Q3, lettings across all of London’s submarkets increased on the previous quarter, with take-up totalling 256,000 sq m. Similarly Paris has also experienced an upturn in leasing activity with lettings totalling 788,000 sq m carried out from July to the end of September, which represents a quarter-on-quarter increase of 46%.  Quarterly office take up in Paris has been prominently driven by a small number of large deals completed by Carrefour and SFR, boosting take-up figures, with Expedia’s move from the West End to the City among the largest deals completed in London.

Despite the escalating Eurozone crisis, prime rents across the region remained static in Q3 with the CBRE EU-27 Office Rent Index edging up slightly (0.1%). One notable exception is Moscow where prime rents rose significantly in the past three months (up 9.5%), marking the fourth consecutive quarter of office rental increase and reflecting the strong rental recovery over the past year (up 31%). 

Matthew Pullen, Head of Global Corporate Services, CBRE EMEA, said: “The European sovereign debt crisis has resulted in a more cautious sentiment among occupiers and it is hardly surprising that some have opted to delay major real estate decisions until the economic outlook improves. However, it is encouraging that against this economic backdrop we are seeing an upswing in leasing activity in London and Paris. It suggests that the flight to quality trend continues and corporates are exploiting static rents to upgrade to better space.”

The outlook in Europe contrasts with the continuing rental recovery in the Asia-Pacific region where prime rents have risen 2.2% in the past three months, contributing to a 12.9% upturn in the past year (compared to 1.8% in Europe).

Gábor Borbély, Head of Research & Consultancy at CBRE Budapest, added: “Supply growth has significantly slowed in Budapest throughout 2011, reflecting the halt in speculative construction. Despite strong take-up in Q3, the overall vacancy rate increased marginally and remains high above 20%. Rental values are unchanged on previous quarters. Although Q4 figures are not finalized yet, we expect demand to remain strong also in the last quarter of the year.”