colliers h2 2014 emea office

892019 Colliers H2 2014 EMEA Office

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1 Office Snapshot | H2 2014 | EMEA | Colliers International

Office Snapshot

H2 2014

EMEA

Te economy new year

same problemsTe beginning of the year is an ideal time to look back take

stock of the situation and make forecasts for the year ahead

After a quite promising start 2014 has left us with a number of

unresolved issues some old and some newhellip

bull Renewed concerns over the solidity of the Eurozone and

whether the Euro is effectively irreversible as rumours of

a ldquoGrexitrdquo resonate again

bull Te threat of deflation in Europe and the scale and timing

of the ECBrsquos plans to address that

bull iming of the increase in interest rates in the UK andUS ndash though increasingly likely to be pushed back

bull Te effects of a burst of the property bubble in China on the

global economy

hellipbut also a few certainties

bull Even the sounder European economies cannot withstand

a spell of prolonged weakness in key economic partners

bull Te power of politics how political outcomes or even simple

speculation on those can drive sudden change in sentimenteg the upcoming elections in Greece

bull Outside Europe the US has reaffirmed its role of economic

powerhouse with annual GPD growth in at 5 in Q3 2014

bull Bubble or not Chinarsquos economy is structurally slowing down

How the former play out will shape the European economic

landscape in 2015 In our view a slow growth scenario remains

the more likely at present

Mixed rental growth patterns

In H2 2014 conditions across European office markets continued

to reflect the uneven rhythm of economic growth in Europe

Tat has led us to divide them into four main categories

ldquoUnder pressurerdquo markets these comprise parts of southernEurope and the Eastern fringe of the continent (Russia Ukraine)

Uncertainty and economic weakness have kept rents under

pressure here and resulted in increasing vacancies and this will

likely carry over to 2015

Stableflat markets these include a mixed bag of markets

such as Germany Big 6 Paris parts of Scandinavia and CEE In

Germany prime rents increased throughout 2014 and are now

at their cyclical peak Demand has also softened reflecting the

more cautious economic outlook Despite the more worrying

state of the French economy prime CBD office rents in Paris

were unchanged in H2 but downside pressure remains in placeacross the rest of the market In most cases including Paris and

Germany prime rents are forecast to remain stable through at

least the first part of 2015

Prime CBD Net Office Rent Growth

H2 2014 vs H1 2014

20

15

10

5

-0

-5

-10

-15

-20

-25

-30

D u b l i n

L o n d o n ndash C i t y

M i l a n R i g a

R o m e

O s l o

A n t w e r p

B e l f a s t

A m s t e r d a m

B a r c e l o n a

L o n d o n ndash W e s t E n d

M a d r i d

B r i s t o l

B i r m i n g h a m

M a n c h e s t e r

G e n e v a

M u n i c h

W r o c l a w

B e r l i n

E i n d h o v e n K y i v

D uuml s s e l d o r f

M o s c o w

M i n s k

S a i n t P e t e r s b u r g




ldquoCBD-ledrdquo recovering markets these include key office

locations in Spain Ireland and Netherlands which are

benefitting from the economic upturn and improved sentiment

In H2 prime rents rose the most in Dublin (+143) but also

in Madrid (+20) Barcelona (+29) and Amsterdam (+29)

In the latter prime rental values are now near their pre-crisis

levels Despite Italyrsquos continuing economic woes Milan and

Rome have also seen a first glimpse of rental growth in H2 forthe first time since 2011 in the former and 2012 in the latter

In Madrid and Dublin rents are nonetheless rising from

a very low base and in virtually all the markets in this category

increases are localised and confined essentially to CBDs and the

best office districts In 2015 we expect continued improvement

for these markets subject to the economic recovery remaining

on track with greater downside risks for Italy

ldquoAhead of the curverdquo markets this grouping is dominated

by the UK where there are signs of rental growth becoming

increasingly broad-based and filtering through to the regions

In H2 2014 prime rents increased in London West End (+21)

London City (+83) Manchester (+16) Birmingham (+18)and Bristol (+18) Forecasts point to CBD rents increasing

further in a majority of centres in the next 12 months as

business confidence continues to improve

Capital markets aheadof fundamentals

In H2 we saw the weight of capital targeting European real

estate pushing prime office yields lower across a diverse

number of locations With the leasing market generally still

lacking vigour this means pricing continued to move faster than

fundamentals especially in recovering markets

(see previous section) where the rental recovery has been so far

primarily driven by a shortage of good quality space rather than

a convincing upturn in demand

Indeed virtually all those markets have seen prime office yields

moving in by varying degrees in H2 2014 Amsterdam (-20 bps)

Madrid (-75 bps) Barcelona (-75 bps) and Dublin (-50 bps)

Yield compression continued to be observed in the so-calledldquosafe-havenrdquo markets of London (West End and City

-25 bps) Paris (-10 bps) Munich (-25 bps) and Frankfurt

(-10 bps) but also across regional UK cities (Manchester

-50 bps Birmingham -50 bps Edinburgh -25bps Glasgow

-25 bps) testament to the positive sentiment around the UK

economy and property market and expectations of rental

growth

Other cities that recorded downward movements in yields over

the same period include Brussels Dusseldorf Oslo Prague

Budapest Sofia allinn and Vilnius By contrast reflective of

the weaker economic prospects prime office yields rose in

Moscow and Kiev

Going forward expectations of a lasting ultra-low interest rate

regime in Europe suggests that the yield spread even for prime

office properties will remain appealing despite the degree of

yield compression that has already occurred Tis combined

with the sheer volume of domestic and cross-border capital

seeking real estate investments in core and now increasingly

in more peripheral and cyclically recovering markets point to

further yield compression in 2015 particularly in the latter




CITY COUNTRY MEASUREMENTPRIME CBD

RENT

983094 MONTHS

CHANGE

ANNUAL

CHANGE OUTLOOK

AVERAGE

CBD RENTS

PRIME

YIELD

983094 MONTHS

CHANGE

BPS

ANNUAL

CHANGE BPSOUTLOOK

Tirana Albania EURsqmmonth 983090983092983093 983088983088 983088983088 tu 983089983095983088 983097983093983088 983088 983088 tu

Vienna Austria EURsqmmonth 983090983096983088 983088983088 983095983095 p 983089983097983093 983091983096983088 983088 983091983088 tu

Minsk Belarus EURsqmmonth 983091983092983088 -983096983089 -983096983089 tu 983090983096983088 983089983091983088983088 -983089983093983088 -983089983093983088 na

Antwerp Belgium EURsqmmonth 983089983090983093 983092983090 983095983096 tu 983089983088983093 983095983088983088 983088 -983090983093 q

Brussels Belgium EURsqmmonth 983090983090983089 983088983088 983093983090 tu 983089983093983088 983093983095983093 -983090983093 -983090983093 q

Sofia Bulgaria EURsqmmonth 983089983091983088 983088983088 983096983091 p 983089983088983093 983097983088983088 -983093983088 -983093983088 tu

Zagreb Croatia EURsqmmonth 983089983093983088 983088983088 983088983088 tu 983089983090983088 983096983093983088 983088 983088 tu

Prague Czech Republic EURsqmmonth 983089983097983093 983088983088 -983092983097 tu na 983094983088983088 -983090983093 -983093983088 tu

Copenhagen Denmark DKKsqmyear 983089983096983088983088983088 983088983088 983088983088 tu 983089983091983088983088983088 983093983093983088 983088 983088 q

Tallinn Estonia EURsqmmonth 983089983094983088 983088983088 983088983088 tu 983089983092983092 983095983089983088 -983092983088 -983092983088 tu

Paris France EURsqmmonth 983094983090983093 983088983088 -983091983096 tu na 983091983097983088 -983089983088 -983089983088 q

Tbilisi Georgia USDsqmmonth 983090983089983088 983088983088 983088983088 tu 983089983091983094 983089983090983088983088 983088 983088 tu

Berlin Germany EURsqmmonth 983090983095983088 -983089983096 -983089983096 tu 983089983097983088 983092983093983088 983088 983088 tu

Duumlsseldorf Germany EURsqmmonth 983090983094983088 -983093983093 -983093983093 tu 983089983097983093 983092983097983088 -983090983088 -983090983088 tu

Frankfurt Germany EURsqmmonth 983091983096983088 983088983088 983088983088 tu 983091983090983093 983092983095983093 -983089983088 -983089983088 tu

Hamburg Germany EURsqmmonth 983090983092983093 983088983088 983090983089 tu 983090983090983093 983092983093983088 983088 -983090983088 tu

Munich Germany EURsqmmonth 983092983089983088 -983089983090 983088983088 tu 983091983088983088 983092983088983088 -983090983093 -983090983093 tu

Stuttgart Germany EURsqmmonth 983090983093983088 983088983088 na tu 983089983096983088 983093983089983088 983088 -983089983088 tu

Athens Greece EURsqmmonth 983089983094983088 983088983088 -983089983089983089 tu 983089983089983088 983096983090983093 983088 -983090983093 tu

Budapest Hungary EURsqmmonth 983089983096983088 983088983088 983088983088 tu 983089983090983093 983095983090983093 -983090983093 -983093983088 tu

Dublin Ireland EURsqmyear 983092983096983088983088 983089983092983091 983090983089983090 p 983092983091983088983088 983093983088983088 -983093983088 -983089983090983093 q

Milan Italy EURsqmmonth 983091983096983094 983095983090 -983091983093 p 983091983090983091 983093983097983088 983088 983088 tu

Rome Italy EURsqmmonth 983091983092983096 983093983093 983092983092 p 983090983094983094 983094983093983088 983088 983091983088 tu

Riga Latvia EURsqmmonth 983089983095983088 983094983091 983094983091 tu 983089983092983088 983096983088983088 983088 983088 tu

Vilnius Lithuania EURsqmmonth 983089983095983092 983088983088 983088983088 p 983089983092983096 983095983093983088 -983090983093 -983090983093 q

Amsterdam Netherlands EURsqmyear 983091983093983088983088 983090983097 983092983093 p 983090983092983093983088 983093983097983088 -983090983088 -983094983088 tu

Eindhoven Netherlands EURsqmyear 983089983096983093983088 -983090983094 -983090983094 q 983089983091983093983088 na na na na

Rotterdam Netherlands EURsqmyear 983090983091983093983088 983088983088 983088983088 tu 983089983092983096983088 983094983096983088 983088 -983090983088 tu

Oslo Norway NOKsqmyear 983092983093983088983088983088 983092983095 983089983090983093 p 983091983096983088983088983088 983092983096983088 -983090983088 -983092983088 q

Krakow Poland EURsqmmonth 983089983093983093 983088983088 983088983088 tu 983089983091983095 983095983093983088 983088 983088 tu

Warsaw Poland EURsqmmonth 983090983092983088 983088983088 983088983088 q 983089983094983088 983094983088983088 983088 983088 tu

Wroclaw Poland EURsqmmonth 983089983092983096 -983089983091 -983089983091 tu 983089983091983093 983095983088983088 983088 983088 tu

Lisbon Portugal EURsqmmonth 983089983096983096 983088983088 983089983092 p 983089983092983097 983096983088983088 983088 983088 tu

Bucharest Romania EURsqmmonth 983089983095983088 983088983088 983088983088 tu 983089983092983093 983095983095983093 983088 -983093983088 q

Moscow Russia USDsqmmonth 983095983088983088 -983095983091 -983094983095 q na 983097983088983088 983093983088 983093983088 p

Saint Petersburg Russia USDsqmmonth 983092983088983094 -983090983093983090 -983090983093983089 tu 983091983089983090 983097983088983088 983088 983088 tu

Riyadh Saudi Arabia SARsqmyear 983090983091983088983088983088 983088983088 983089983093983088 tu 983089983092983088983088983088 983089983088983088983088 983088 983093983088 tu

Belgrade Serbia EURsqmmonth 983089983095983088 983088983088 983091983088 tu 983089983093983093 983097983088983088 983088 -983093983088 tu

Bratislava Slovakia EURsqmmonth 983089983092983093 983088983088 983088983088 tu 983089983089983088 983095983093983088 983088 983088 tu

Barcelona Spain EURsqmmonth 983089983096983088 983090983097 983090983097 p 983089983092983093 983093983090983093 -983095983093 -983089983088983088 q

Madrid Spain EURsqmmonth 983090983093983088 983090983088 983091983089 p 983089983097983088 983093983088983088 -983095983093 -983089983088983088 q

Stockholm Sweden SEKsqmyear 983093983094983093983088983088 983088983088 983088983097 tu 983092983095983088983088983088 983092983093983088 983088 983088 tu

Geneva Switzerland CHFsqmyear 983096983090983093983088 -983089983090 -983090983097 tu 983093983096983088983088 983092983093983088 983088 983090983093 tu

Istanbul Turkey USDsqmmonth 983092983093983088 983088983088 983088983088 q 983091983091983092 983095983088983088 983088 983088 tu

Kyiv Ukraine USDsqmmonth 983091983089983088 -983091983089 -983089983089983092 tu 983089983095983088 983089983091983088983088 983089983088983088 983090983088983088 tu

Abu Dhabi United Arab Emirates USDsqmmonth 983091983097983088 983088983088 983088983088 tu 983091983088983097 983089983088983088983088 983088 983088 tu

Dubai United Arab Emirates USDsqmmonth 983094983088983088 983089983093983095 983090983095983096 tu 983092983088983097 983089983088983088983088 983088 983088 tu

Belfast United Kingdom GBPsqftyear 983089983092983093 983091983094 983091983094 p 983089983091983088 983094983090983093 983088 983088 q

Birmingham United Kingdom GBPsqftyear 983090983097983088 983089983096 983089983096 p 983090983091983088 983093983090983093 -983093983088 -983093983088 q

Bristol United Kingdom GBPsqftyear 983090983096983088 983089983096 983089983096 p 983090983092983093 983093983095983093 983088 -983093983088 q

Edinburgh United Kingdom GBPsqftyear 983090983095983093 983088983088 983088983088 tu 983090983089983088 983093983095983093 -983090983093 -983090983093 q

Glasgow United Kingdom GBPsqftyear 983090983097983088 983088983088 983088983088 tu 983090983095983088 983093983095983093 -983090983093 -983090983093 q

Leeds United Kingdom GBPsqftyear 983090983095983088 983088983088 983091983096 p 983090983089983088 983093983093983088 983088 -983095983093 q

London ndash City United Kingdom GBPsqftyear 983094983093983088 983096983091 983096983091 p 983093983091983093 983092983090983093 -983090983093 -983093983088 q

London ndash West End United Kingdom GBPsqftyear 983089983090983090983093 983090983089 983090983089 p 983097983093983088 983091983093983088 -983090983093 -983090983093 tu

Manchester United Kingdom GBPsqftyear 983091983090983093 983089983094 983096983091 p 983090983093983088 983093983088983088 -983093983088 -983089983088983088 tu

Prime CBD Net RentThe top open-market tier of rent that could be expected for a unit of standard size(983093983088983088-983089983088983088983088 sqm) and of the highest quality and specification (Grade A) in the bestlocation in the market at the survey date The figure excludes service charges andtaxes and does not reflect tenant incentives

Prime YieldThe yield an investor is prepared to pay to buy a Grade A building fully-let to high qualitytenants at an open market rental value in a prime location The size of the building and leaseterms should be commensurate with the market The yield quoted will reflect local marketpractice which can differ by country




ldquoCBD-ledrdquo recovering markets these include key office

locations in Spain Ireland and Netherlands which are

benefitting from the economic upturn and improved sentiment

In H2 prime rents rose the most in Dublin (+143) but also

in Madrid (+20) Barcelona (+29) and Amsterdam (+29)

In the latter prime rental values are now near their pre-crisis

levels Despite Italyrsquos continuing economic woes Milan and

Rome have also seen a first glimpse of rental growth in H2 forthe first time since 2011 in the former and 2012 in the latter

In Madrid and Dublin rents are nonetheless rising from

a very low base and in virtually all the markets in this category

increases are localised and confined essentially to CBDs and the

best office districts In 2015 we expect continued improvement

for these markets subject to the economic recovery remaining

on track with greater downside risks for Italy

ldquoAhead of the curverdquo markets this grouping is dominated

by the UK where there are signs of rental growth becoming

increasingly broad-based and filtering through to the regions

In H2 2014 prime rents increased in London West End (+21)

London City (+83) Manchester (+16) Birmingham (+18)and Bristol (+18) Forecasts point to CBD rents increasing

further in a majority of centres in the next 12 months as

business confidence continues to improve

Capital markets aheadof fundamentals

In H2 we saw the weight of capital targeting European real

estate pushing prime office yields lower across a diverse

number of locations With the leasing market generally still

lacking vigour this means pricing continued to move faster than

fundamentals especially in recovering markets

(see previous section) where the rental recovery has been so far

primarily driven by a shortage of good quality space rather than

a convincing upturn in demand

Indeed virtually all those markets have seen prime office yields

moving in by varying degrees in H2 2014 Amsterdam (-20 bps)

Madrid (-75 bps) Barcelona (-75 bps) and Dublin (-50 bps)

Yield compression continued to be observed in the so-calledldquosafe-havenrdquo markets of London (West End and City

-25 bps) Paris (-10 bps) Munich (-25 bps) and Frankfurt

(-10 bps) but also across regional UK cities (Manchester

-50 bps Birmingham -50 bps Edinburgh -25bps Glasgow

-25 bps) testament to the positive sentiment around the UK

economy and property market and expectations of rental

growth

Other cities that recorded downward movements in yields over

the same period include Brussels Dusseldorf Oslo Prague

Budapest Sofia allinn and Vilnius By contrast reflective of

the weaker economic prospects prime office yields rose in

Moscow and Kiev

Going forward expectations of a lasting ultra-low interest rate

regime in Europe suggests that the yield spread even for prime

office properties will remain appealing despite the degree of

yield compression that has already occurred Tis combined

with the sheer volume of domestic and cross-border capital

seeking real estate investments in core and now increasingly

in more peripheral and cyclically recovering markets point to

further yield compression in 2015 particularly in the latter





RENT

983094 MONTHS

CHANGE

ANNUAL

CHANGE OUTLOOK

AVERAGE

CBD RENTS

PRIME

YIELD

983094 MONTHS

CHANGE

BPS

ANNUAL

CHANGE BPSOUTLOOK































































RENT

983094 MONTHS

CHANGE

ANNUAL

CHANGE OUTLOOK

AVERAGE

CBD RENTS

PRIME

YIELD

983094 MONTHS

CHANGE

BPS

ANNUAL

CHANGE BPSOUTLOOK



























































colliers h2 2014 emea office

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