Office rental growth improved across Europe in Q2 2010 as prime rents increased by an average of +1%, up from +0.4% in Q1 according to DTZ.

This is a marked improvement from the same quarter in 2009 when rents fell by -5.7%. The rental growth outlook for offices has recovered with prime rents now expected to grow by an average of +2.6% in 2010; they were previously forecasted to increase by +1.1% at the end of March 2010.

Magali Marton, Head of DTZ CEMEA (Continental Europe and Middle East), said: “Rental growth has now returned to an increasing number of markets with the strongest growth over the quarter being recorded in Moscow and in London City. In Moscow, a recovery in demand together with a fall in new supply saw prime rents rebound by 12% in Q2, albeit from a low level following the significant fall witnessed in prime rents last year. In London City, the increasingly constrained levels of available grade A stock pushed prime rents up for a third consecutive quarter, by just over 5%.”

The majority of markets are seeing demand increase by a shortage of supply, particularly for quality office space, in particular markets where developers postponed or delayed projects.
The report stated that this trend had been evident in London and Paris at the beginning of 2010, but has now spread to other markets, including Stockholm, Dublin and Frankfurt. Space upgrades and further consolidation and downsizing of companies resulted in take-up increasing by 11% across the major European office markets in Q2, to reach 1.8million m