The recession will drive down office rents in nearly all of the Euro-zone’s biggest economies in coming months, as distressed businesses relinquish space onto an already bloated lettings market, according to DTZ’s European Quarterly Report.

The report said: ‘Whilst the higher cost of debt has curtailed development in many markets, availability is rising as distressed tenants consolidate and downsize. This will lead to falling rents across the board.’

Demand for office space in the financial services sector in Frankfurt’s office market is leading to tougher lease negotiations between landlords and tenants. DTZ said it expected rents in Germany’s historic financial centre to fall by double-digits in 2009-10 with recovery in the market planned for 2012.

The impact of the financial crisis on the Madrid office market could be compounded by an increase in supply, with about 700,000sqm of development due to complete in 2010.

DTZ said: ‘Madrid will be witness to one of Europe’s largest rental corrections, with prime rents expected to decline by approximately -30-35% over 2009 and 2010.

Prime rents which had reached €500sqm in Q1 2008 will fall to around €350sqm before rents stabilise.’

Like London, Paris has suffered as a result of its dependence on the financial services sector, which accounted for a third of take-up in 2008. DTZ said the recent period of stability in prime rents is now ending, with rental falls of up to -16-18% seen by 2010.

Despite a challenging past 12 months for the Dutch economy, the outlook for Amsterdam’s office market was ‘reassuringly stable’, according to DTZ. Whilst about 180,000sqm of space is in the pipeline, it is unlikely that all of this will be developed in the current market climate, restraining headline rental falls to around 5% in 2009.