Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}

European Grade A Office Availability Ratio Declines As Occupiers Focus On Best in Class Space

18/11/2022
  • European office leasing activity in Q3 well above 15-year average
  • Availability of Grade A space demanded by occupiers remains low and below 2% of total office stock in many key markets
  • Around half of current space under construction is already committed 
  • Occupiers prioritising Grade A assets to futureproof occupational strategies

London, 17 November 2022 – Continued strong demand for the highest quality workplaces drove prime headline office rents across Europe up by 1.8% during Q3, pushing annual rental growth to 5.3%, according to research from global real estate services firm Cushman & Wakefield. This is nearly 11 times the rate of annual growth – just 0.5% – recorded across the same period a year ago.  

Overall leasing activity across Europe’s leading cities totalled 2.97 million square metres (m sqm) in Q3 2022, a 7% jump on the same period a year ago. For the 12-month period up to and including Q3 2022, leasing totalled 12.7m sqm, representing a 29% leap on the 9.86m sqm leased from Q4 2020 to Q3 2021. During the most recent 12-month period, several of Europe’s leading cities including Brussels, London, Madrid, Munich, Paris, and Warsaw have seen leasing activity grow by more than 50% compared with the preceding 12-months. 

The 12.7m sq m figure reflects the sustained recovery in European office leasing activity since the lifting of coronavirus restrictions, sitting comfortably above the 15-year average of 10.4m sqm and not far off the 13.2m sqm leased across the last full pre-pandemic calendar year of 2019.

Nigel Almond, Head of Data Analytics at Cushman & Wakefield, said: “The pandemic highlighted the need for occupiers to have space that is attractive to employees and creates the right working environment to support a flexible working strategy, collaboration, and staff wellbeing, as well as ensuring access to amenities within, or near to, the office. That is no longer simply an aspiration, it is driving decision making and feeding through into the data and the ongoing bifurcation of the office market.”

The Availability Picture
Having shrunk to below 6% prior to the pandemic, Europe’s availability ratio – the amount of total office stock that is available currently to lease – rose to just over 8% in Q3 2022, its highest level since Q2 2015, despite the strong leasing activity. The rise in part reflects the cumulative impact of new office scheme completions during the pandemic at the same time as leasing activity was subdued. The Grade A availability ratio was not immune and has risen to 2.6% in Q3 2022 from 1.5% in Q4 2019. For context, the amount of space reported as being under construction each quarter, has averaged 16.4m sqm a year over the last three years. Over the same period, we have seen the level of new office completions average of 1.2m sqm each quarter.

A clear polarisation in the market is emerging. At the European level, Grade A availability ratio has remained stable at 2.6% quarter-on-quarter. Indeed, in several markets, including Brussels, Lisbon, Munich, and Paris the ratio of Grade A availability to total office stock sits below 2%. However, the availability ratio for non-grade A climbed to 5.5% in Q3 2022 from 5.2% in the previous quarter. 

Consequently, the proportion of Grade A space as a percentage of available European office space has shrunk from 35% to 32% over the last two quarters. While still relatively high by historic standards, several factors including a flight to quality and slowing construction activity are expected to exert downward pressure on Grade A availability, both as a ratio with total stock and as its proportion of available space. 

Nigel Almond added: “Occupiers want modern space, with greater flexibility and space utilisation, that meets the latest environmental, wellbeing and digital connectivity standards. With regulations coming into force across Europe requiring certain minimum standards to be met to lease space, the focus on Grade A will intensify as these assets are fit for purpose today and for the future. As occupiers relocate, and in some cases downsize, we see a release of Grade A stock back to the market, hence driving higher the amount of non-grade A space and overall availability ratio. 

“We’ve also seen signs in the last quarter of construction activity slowing. Just 15.4m sqm of space is currently under construction, of which less than half is on a speculative basis, while office completions totalled 0.97m sqm in Q3 2022. Both these measures are below the three-year average, a slowdown which may be a response to rising construction costs and economic headwinds. Regardless of the cause, it will ensure the amount of grade A space remains restricted which will in turn support price levels.”

‘Grade A’ and ‘Non-Grade A’ Availability

Grade-A-and-Non-Grade-A-Availability

Source: Cushman & Wakefield Research

About Cushman & Wakefield 

Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 50,000 employees in over 400 offices and approximately 60 countries. In 2021, the firm had revenue of $9.4 billion across core services of property, facilities and project management, leasing, capital markets, and valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake External Link on Twitter.

MEDIA CONTACT

Richard Coleman, Head of Communications EMEA
Richard Coleman

Head of EMEA Communications • London

What's new

Chris Taylor
Cushman & Wakefield Appoints Partner To Lead North West Residential Valuation & Advisory Team

Commercial real estate services firm, Cushman & Wakefield, has appointed Chris Taylor as a Partner to lead its Residential Valuation & Advisory team in the North West.

07/02/2023

James-Young
Cushman & Wakefield Expands James Young’s Head of Investor Services EMEA Role To Include Asia Pacific

Cushman & Wakefield, a global leader in commercial real estate services, has expanded the role of James Young, Head of Investor Services EMEA, to also include the Asia Pacific region. The promotion will take effect from January 2023.

14/12/2022

Manchester
The Crown Estate Appoints Cushman & Wakefield As Hospitality and Leisure Advisors Across Its London Portfolio

The Leisure & Restaurants Team at real estate services firm Cushman & Wakefield, led by Matt Ashman, Megan Hutchinson and Matt Englender, has been appointed by The Crown Estate to advise on the Hospitality and Leisure aspects of its London portfolio.

14/12/2022

CAN'T FIND WHAT YOU'RE LOOKING FOR?

Get in touch with one of our professionals.
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Cookies.
MORE OPTIONS
Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS