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Office Space Investment
There are growing regional disparities between European office markets, with the central business districts (CBDs) in cities such as Athens, Dublin and Madrid experiencing significant falls in rental values over the course of the last year. By contrast, locations including London, Vienna and Paris have seen rents increase significantly during the same period. This is the finding of a new report by Savills, which also identified a pattern of occupier caution across the continent. Eri Mitsostergiou, of the firm's European research team, commented: "Tenant demand is generally weakening under the impact of negative business confidence. The uncertainty is also impacting the construction sector, with new supply expected to remain low, thus averting a double-dip scenario for core prime CBD rents."Overall, the take up of office space in Europe fell by 2.4 per cent year-on-year by the end of 2011, with the organisation noting there were few large deals in the sector during this time, although the medium segment was more robust. According to a survey of market experts conducted by Savills, 28 per cent of those questioned expect demand for offices to fall in 2012, while 67 per cent believe it will remain broadly stable. However, a lack of new supply coming on to the market will help ensure vacancy rates do not creep up over the next 12 months, with the firm anticipating these will actually fall from the 10.5 per cent recorded in the final quarter of 2011, to 10.4 per cent by the end of March this year.Several European markets posted above-average rental rises last year, with Paris, Stockholm, Milan, London and Munich among the locations singled out by the organisation. People seeking real estate investment opportunities in the office market may therefore want to focus their attention on these robust destinations. However, the situation in Madrid, Athens and Dublin is very different, with rents for CBD offices in these cities sliding by 5.5 per cent, 17.9 per cent and 13.3 per cent respectively over the course of 2011. Of these markets that have been hit particularly hard by the sovereign debt crisis in Europe, Madrid and Berlin appear to be faring better than Athens. In its European Fair Value Q4 2011 report published last month, DTZ upgraded the outlook for the office sector in the Spanish city from cold to warm, while it also predicted more robust rental growth for Dublin over the next five years.
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