The demand for the European Office Space is based on several main topics, not just economic health – the economic cycle is not the only driver. In addition, demand is influenced by long-term systemic factors and issues such as population ageing, economic change, technology, and urbanization. Despite the vast sums of capital pouring in and out, consumer appetite remains extremely concentrated. In comparison to the flat prices or declines in other industries, retail yields are yet on the rise (Fig 2).
Although the COVID-19 pandemic has significant consequences on economic growth, the European Office’s room for recovery is well placed. Investment volumes are anticipated to rebound to pre-pandemic standards by 2022, according to different business viewpoints. The GDP of the euro area is expected to contract by 7.3% in 2020 and to rebound by 4.6% in 2021, provided there is easy lock-down and a broader vaccination is available.
The lockdowns made it increasingly difficult for the office rental market to emerge profitable over the first three quarters of 2020. But in 2021, we expect improvement, with continuing demand in primary city locations for high-quality, amenity-rich areas (Fig-1).
Investors continue to favour offices in cities such as Amsterdam, Berlin, Copenhagen, Paris, Munich, Manchester, London, and Stockholm, with different economies.
Most office spaces in Europe are used below average after 12 months of the pandemic. Back in 2020, €83.5bn is transacted in office spaces. Researches have shown that the lockdowns have however threatened the lease market for office space and have decreased 40 per cent over the same timeframe of 2019 over the first three quarters of 2020 & have analysed as 38 European office building markets within Europe and concluded that the number of transactions in Europe (including in the United Kingdom) is decreasing, as part of the European study.
The volume decreased more dramatically in pandemic affected regions, some of which had lengthy lockdowns. The highest declines were observed in Ireland (-69%), Luxembourg (-55%), and Sweden (-49%).
However, transaction volumes grew by 38% in Norway and 30% in Belgium in relation to last year’s same period (Fig-3).
The price growth was able to largely avoid the negative trend in the letting markets and investment volumes. After mid-2020, all prime rents and yields have stayed almost constant amid a modest uptick in vacancies, highlighting the unmoving strong investor interest.
Here are the other important highlights for the European Office Space
In 2020 the real estate markets have seen a huge disruption, with a COVID-19 pandemic that puts an immediate cessation to the previous economic cycle. The effect and recovery won’t be identical in all fields and geographies, but there will be new prospects and the probable launch of vaccinations is the basis for a sustained recovery in 2021.
Canary Wharf, 40 Bank St
London, E14 5NR
Bastion Tower (level 11-12)
5, Place du Champ de Mars
Sheikh Zayed Road
United Arab Emirates
Two International Finance Centre
8 Finance Street Central
Boulevard de la Corniche