European office net effective rents decrease by an average of 2 per cent, says Savills

European office net effective rents decreased by an average of 2 per cent over the last six months, falling most significantly across Paris CBD (-12 per cent), Dublin (-11 per cent) and Amsterdam (-5 per cent), according to research by Savills. 

By contrast, low vacancy rates across Munich at 2.9 per cent and Berlin at 2 per cent have continued to apply upward pressure on headline rents, despite additional landlord incentives.
Rising levels of available space have been fairly broad-based across each European market, with the average core market vacancy rate rising from 3.0 per cent to 4.5 per cent, according to the international real estate advisor. The equilibrium for stable rental growth across core European markets is a vacancy rate of circa 9 per cent, suggesting the core markets still have some headroom for vacancy rates to increase before there is any real impact on prime headline rents.
Mike Barnes, Associate, Savills European Research, says: “In most of Europe, we are observing landlords offering more flexible leasing proposals as a result of market uncertainty. For example, Manchester’s rent free period increased from 12 months to 15 months on a five year lease during H2 2020 while in Madrid, landlords are able to offer leases with two fixed years plus three optional years. This includes more generous contributions to fit-outs, although rent free periods have remained fairly stable over the six month period.”
Matthew Fitzgerald, Director, Savills EMEA Cross Border Tenant Advisory, says: “We anticipate average lease incentives will continue to rise throughout 2021 as lockdowns persist, although once certainty returns, businesses will seek a long-awaited return to the workplace. Looking forward, tenants who are able to lock in improved incentives this year will be the main beneficiaries.”

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