CB Richard Ellis: Offices Market View for Q4 2006
"According to CB Richard Ellis’ EMEA Offices Market View for Q4 2006 the European office market enjoyed further recovery in demand throughout the year. Leasing activity in Q4 2006 accelerated, with a number of markets registering take-up levels second only to those seen in 2000 and Madrid and Paris recorded their highest ever levels of quarterly gross take-up.
Michael Haddock, Director of EMEA Research at CB Richard Ellis, comments "As a result of resurgence in office demand the CB Richard Ellis EU-15 Vacancy Index fell for the eighth successive quarter to 7.64% and so far the development pipeline has increased only marginally. Future supply is, therefore, becoming a key factor determining the future performance of European offices".
Iryna Pylypchuk, Senior Analyst at CB Richard Ellis, added "The strong up-tick in leasing activity on European offices has been reflected in the direct investment market. Over €230 billion of commercial property deals were transacted in 2006, driving the CB Richard Ellis Weighted Average Office Yield down to 4.94%. However, the rate of decline is slowing and the general feeling is that the office yields, at least in the prime segment of the market, are reaching their floor".
2007 is expected to see the leasing market perform well again, backed by reasonable economic indicators and recent growth in Financial Services sector. The CB Richard Ellis EU-15 Office Rent Index increased by 6.9% year-on-year in the last quarter of 2006 and future rental growth expectations also remain positive. With yields flattening out after further increases in European interest rates, it is rental growth that will be driving investor returns going forward.
"There were signs of the long-awaited economic recovery in Italy in 2006 and this coincided with some improvement in the office occupier market in Milan. Relocation activity is main driver of take-up. As a result of increasing demand the vacancy rate tended to fall both in CBD and in Greater Milan. The market is generally stable in rental terms and the outlook remains positive, although without substantial rental growth" comments Shoko Sano - Research Department - CB Richard Ellis Italy." (CS della Società)