Demand for office space in the European market has been hampered by a lack of good quality supply in the first quarter of 2016, according to the Savills European Offices Market report, with most cities unlikely to feel the impact of a projected 22% rebound in development activity.                            

Total take-up for office space in Europe reached 1.75m sqm in the first quarter of 2016 which is almost the same figure registered for the same period last year. Limited office development combined with a strong level of take-up has dried up supply across most cities with only three exceptions: Poland, Copenhagen and London West End.

Office take-up in the first quarter was increasingly being driven by business expansion, which explains the growing demand for small and medium-sized office floor space in various cities.                                                                                                     

Since office completions dropped by 16% in 2015, and letting activity over the past 12 months remained dynamic, the level of supply has continued to decrease rapidly. Based on the overall office pipeline there is an anticipated rebound of development activity of 22% by the end of the year, creating approximately 2.7m sqm of office space.

This represents about 42% of the average five-year take-up across Europe, but it is unlikely to make an impact on the majority of markets. With the exception of Warsaw and Brussels, many projects are already pre-let, (up to 63% in Berlin), and it is expected that vacancy rates will either decline or remain stable.