This Office Review assists corporate office occupiers in making (re)-location decisions by providing our latest views on major European office markets. Amid ongoing tensions in the Eurozone and weak economic growth, overall corporate activity remained subdued across Europe in the first half of the year, with some markets registering more pronounced slowdowns than others. Madrid, Milan and Kyiv recorded decreases in rents while solid economic growth pushed up rental values in the Nordic markets. In general, European occupiers are primarily focusing on cost control and efficient space use, rather than on expanding or relocating to new markets. In a bid to secure tenants in a weak market, landlords are offering increasingly favourable incentives. Rent-free periods are typically included in leases, creating a 10% average differential between effective and headline rents across the region. The performance of corporate profitability and the rate of economic recovery will determine future levels of business expansion and demand for space from occupiers. Whilst cost consciousness dominates the office occupier markets and a return to the „good old times‟ seems unlikely in the short term, many occupiers remain confident about their future business prospects. Central and Eastern Europe (CEE) economies are less weighed down by fiscal burdens and often seen as the region offering the greatest scope for business expansion in the medium term. According to Oxford Economics, GDP in CEE is expected to grow at an average annual rate of 3.8% between 2012 and 2016, compared to the Western European average growth rate of 1.3% for the same period. A healthy amount of new supply is also expected in Eastern Europe while several major Western markets will continue to suffer from lack of grade a supply.
Source: DTZ (Groupe UGL)