In the latest European office market report from international real estate advisor Savills, the TMT (Technology, Media & Communications) sector has shown a significant increase in its share of the total leasing market from 15% in 2009 to a current level of 20%.  The firm notes that this increase is a reflection of the emergence of the sector throughout many of the local European markets that it tracks*.

Savills confirms that overall the business and consumer services sector was the main driver of occupational demand in the European office market in 2012 accounting for a 28% share, while areas such as public sector (public services, education and health) and the insurance and financial sector have seen a weakening. Leasing activity in general across Europe saw a 2.2% decrease in 2012 compared to 2011, however when assessing specific markets Savills found that, as a result of some substantial deals, cities such as Frankfurt, Amsterdam, London City, Paris, Vienna, Warsaw and Brussels saw higher levels of take-up in 2012. 

Eri Mitsostergiou, director of Savills European Research, comments: “Whilst the overall office take-up picture for Europe is lower, there are pockets that are either in-line with or exceeding the five-year average take-up levels. Warsaw for example is one of the strongest outperformers with its 2012 take-up level 21% above the five-year average, while the German markets are also between 7% and 30% above their five-year average.

“Looking forward we expect demand and supply in the core markets to remain balanced, while the more peripheral markets will remain subdued until we see an improvement in business confidence.”

Savills states the overall vacancy rate for the European office markets that it monitors dropped for the tenth consecutive quarter in Q4 12 and is currently approximately 20 basis points lower than Q4 11 at circa 10.1%. The firm notes that this downward trend is mainly supported by the core markets (Vienna, Brussels, Paris, German Cities, Amsterdam, Oslo, Stockholm and London), where the average vacancy rate is 8.6%, comparable to Q4 07 levels.

When assessing office rents across Europe, Savills highlights that the trend in the core cities remained positive. In 2012 the annual prime CBD rental growth for the core markets was at 4%. While the peripheral areas have seen some negativity, the firm also notes that overall rental decreases in the periphery markets are becoming less dramatic with prime rents in Dublin in particular on a good recovery path.

* The European markets that Savills monitors include Paris, Athens, Madrid, Stockholm, Warsaw, Cologne, Berlin, Frankfurt, Dublin, Milan, Amsterdam, Lisbon, Munich, London (City, West End and Thames Valley), Hamburg, Oslo, Brussels, Dusseldorf and Vienna.