In its latest European research report Savills highlights that contrary to expectation markets perceived as stronger offer higher rental concessions to tenants than markets perceived as weaker.
In its latest European research report Savills highlights that contrary to expectation markets perceived as stronger offer higher rental concessions to tenants than markets perceived as weaker. The survey examines the impact that economic challenges in the period 2008 – 2013 have had on headline rents and rental incentives offered by landlords across 19 European markets. The firm notes that London City, Paris CBD and Paris La Defense currently offer some of the highest available discounts - approximately 20% of the total months over a lease term.
Julia Maurer, European research analyst, explains: “Over the past five years landlords in some of Europe's prime office markets have lengthened rent free periods to support headline rents. This means that markets such as London and Paris, where landlords should be feeling more confident, have surprisingly large incentives on offer."
On average rent free concessions for prime CBD space have increased by 21% across Europe in 2013 compared with 2008 and currently account for an average 12% of the total rental period in the markets examined. The highest percentage of rent free months offered in the markets surveyed is in Milan (25%), followed by the two Parisian markets, CBD and La Defense, (21% each) and London City and Dublin (each 20%). On the other hand Athens, where prime headline rents have fallen significantly over the past five years (-30%), only offers 2% of months rent free.
The international real estate advisor highlights that overall Q1 2013 take-up levels rose in approximately half of the locations surveyed. The firm suggests that going forward this improved take-up could lead to a reduction of incentives offered by landlords in these markets, and therefore have a positive impact on real rental growth. According to Savills research the outlook is particularly positive for London, Vienna, Brussels and Warsaw which all recorded year-on-year take-up increases of approximately 20%.
Eri Mitsostergiou, Savills European research director, says: “We are seeing a moderately positive trend across European office markets as the average amount of rent free periods offered is in some cases decreasing. German cities in particular reflect this trend, with rent free periods either stable or going down and only a small difference between headline and effective rents.”
Overall the report shows that incentives seem to be determined by the combination of different market indicators, such as availability and demand, and the individual local characteristics. It concludes that incentives are therefore a good indicator of the general market sentiment.
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Notes for editors:
The markets surveyed for this report include Amsterdam, Athens, Berlin, Brussels, Dublin, Frankfurt, Hamburg, Lisbon, London City, London West End, Madrid, Milan, Munich, Oslo, Paris CBD, Paris La Defense, Stockholm, Vienna, Warsaw.
For further information, please contact:
Julia Maurer, Savills research Tel: +44 (0) 20 7016 3833
Eri Mitsostergiou, Savills research Tel: +31 (0) 20 301 2087
Lucie Richards, Savills press office Tel: +44 (0) 20 7409 8884