1 Office Snapshot | H1 2014 | EMEA | Colliers International

Office Snapshot

H1 2014EMEA

More Positive Outlook For RentsRental growth remains uneven across Europe, but overall the tone of rental data appears to have improved in H1 2014, along with the economic outlook. Of the 54 office markets monitored, the majority (29) exhibited no change in rents (32 last year), while 17 reported increases (9 last year). In contrast, 8 cities (13 last year) saw reductions.

A number of trends were apparent:

• Even if only marginally, prime rents moved ahead in a number of Southern European markets like Madrid and Lisbon, ending a correction which in Madrid’s case had lasted since 2009.

• The upward trajectory of rents over the last 18 months underscores the recovery of Amsterdam’s prime office district, amid an increasing gap between primary and secondary markets in the Netherlands.

• The German office market continued to show strength, against expectations of rental growth moderating. Stuttgart registered the largest jump (+25%) in prime CBD rents, while Munich saw the seventh consecutive increase since H2 2010, on a half-yearly basis.

• London is expected to continue to lead the rental upturn. While prime rents were unchanged in H1 2014, dwindling supply and growing occupier confidence is set to feed into an increase in rental levels in the coming months. As the UK economy continues to power-forward, rental growth is also filtering through to regional office markets, with increases in Manchester and Leeds.

• Reflecting the healthier state of the office market, Dubai prime rents continued to rally and are now almost 20% up on their cyclical trough; though still some way off their pre-crisis peak (-40%).

Peripherals Lead Yield CompressionECB’s recent moves, the weight of capital now targeting European real estate and rental growth expectations contributed, in most instances, to stable or falling office yields in the first half of 2014.

As expected, given current high levels of interest, yield compression was observed in many peripheral markets like Dublin (-75 bps), Madrid (-50 bps), Barcelona (-25 bps) and Athens (-25 bps). Amsterdam also saw prime yields moving in by 40 bps compared to the end of 2013, along with a sharp increase in investment volumes. Prime yields also hardened in a number of cities in CEE, notably Bucharest (-50 bps), Budapest (-25 bps) and Prague (-25 bps), with the latter two markets witnessing continued growth in investment volumes and increasing levels of investor appetite in the first half of 2014.

In Europe’s core, the City of London was one the few markets to see some degree of yield compression (-25 bps to 4.5%), under the weight of new sources of Asian capital targeting the London office market.

Some of the trends outlined here are expected to continue in the coming months, particularly the rally of values across most of Europe’s periphery. As of H1 2014, cities expected to see further yield compression in the next 12 months include: Dublin, Manchester, Athens, Barcelona, Bucharest and Prague.

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2 Office Snapshot | H1 2014 | EMEA | Colliers International

CITY COUNTRY MEASUREMENT PRIME CBD RENT

6 MONTHS CHANGE %

ANNUAL CHANGE % OUTLOOK AVERAGE

CBD RENTS PRIME YIELD 6 MONTHS CHANGE BPS

ANNUAL CHANGE BPS OUTLOOK

Tirana Albania EUR/sqm/month 24.5 0.0 0.0 tu 17.0 9.50% 0 n/a tu

Vienna Austria EUR/sqm/month 28.0 7.7 7.7 p 19.5 3.80% 30 30 tu

Minsk Belarus EUR/sqm/month 37.0 0.0 0.0 tu 34.5 14.50% 0 50 tu

Antwerp Belgium EUR/sqm/month 12.0 3.4 3.4 tu 10.5 7.00% -25 -25 q

Brussels Belgium EUR/sqm/month 21.0 0.0 0.0 tu 15.0 6.00% 0 0 tu

Sofia Bulgaria EUR/sqm/month 13.0 8.3 8.3 p 9.0 9.50% 0 50 tu

Zagreb Croatia EUR/sqm/month 15.0 0.0 0.0 tu 12.0 n/a n/a n/a tu

Prague Czech Republic EUR/sqm/month 19.5 -4.9 -7.1 tu n/a 6.25% -25 -25 q

Copenhagen Denmark DKK/sqm/month 150.0 0.0 0.0 tu 108.3 5.25% 25 25 tu

Cairo Egypt USD/sqm/month 35.0 -2.8 -2.8 q 21.5 9.00% 0 0 tu

Tallinn Estonia EUR/sqm/month 16.0 0.0 0.0 tu 14.5 7.50% 0 0 tu

Paris France EUR/sqm/month 62.5 -3.8 -6.3 tu n/a 4.00% 0 -25 tu

Berlin Germany EUR/sqm/month 27.5 0.0 1.9 tu 19.0 4.50% 0 -50 tu

Düsseldorf Germany EUR/sqm/month 27.5 0.0 0.0 q 21.2 5.10% 0 0 tu

Frankfurt Germany EUR/sqm/month 38.0 0.0 2.7 tu 32.0 4.85% 0 -30 tu

Hamburg Germany EUR/sqm/month 24.5 2.1 4.3 tu 22.5 4.50% -20 -20 tu

Munich Germany EUR/sqm/month 41.5 1.2 2.5 p 30.5 4.25% 0 0 tu

Stuttgart Germany EUR/sqm/month 25.0 25.0 23.2 tu 18.0 5.10% -10 -10 tu

Athens Greece EUR/sqm/month 16.0 -11.1 -15.8 p 11.0 8.25% -25 -25 q

Budapest Hungary EUR/sqm/month 18.0 0.0 0.0 p 12.5 7.50% -25 -25 p

Dublin Ireland EUR/sqm/month 35.0 6.1 16.7 p 33.0 5.50% -75 -100 q

Milan Italy EUR/sqm/month 36.0 -10.0 -13.6 tu 28.5 5.90% 0 20 tu

Rome Italy EUR/sqm/month 33.0 -1.0 -3.4 tu 26.0 6.50% 30 50 tu

Riga Latvia EUR/sqm/month 16.0 0.0 0.0 tu 12.0 8.00% 0 0 tu

Vilnius Lithuania EUR/sqm/month 17.4 0.0 0.0 p 14.6 7.75% 0 -25 tu

Amsterdam Netherlands EUR/sqm/month 28.3 1.4 9.3 p 18.3 6.10% -40 -40 tu

Eindhoven Netherlands EUR/sqm/month 15.8 0.0 5.3 q 11.3 n/a n/a n/a n/aRotterdam Netherlands EUR/sqm/month 19.6 0.0 4.3 tu 11.9 6.80% -20 -50 tu

Krakow Poland EUR/sqm/month 15.5 0.0 3.3 tu 13.7 7.50% 0 0 n/aWarsaw Poland EUR/sqm/month 24.0 0.0 -4.0 q n/a 6.00% 0 0 n/aWroclaw Poland EUR/sqm/month 15.0 0.0 0.0 tu 13.5 7.00% 0 0 n/aLisbon Portugal EUR/sqm/month 18.8 1.4 1.4 p 14.8 8.00% 0 0 tu

Bucharest Romania EUR/sqm/month 17.0 0.0 -5.6 p n/a 7.75% -50 -75 q

Moscow Russia USD/sqm/month 75.5 0.7 -0.4 tu 48.3 8.50% 0 -50 p

Saint Petersburg Russia USD/sqm/month 54.3 0.2 0.2 tu 37.4 9.00% 0 0 tu

Jeddah Saudi Arabia SAR/sqm/year 1,325.0 1.9 -3.1 tu 1,075.0 9.00% -100 -100 tu

Riyadh Saudi Arabia SAR/sqm/year 2,300.0 15.0 0.0 tu 1,400.0 10.00% 50 0 tu

Belgrade Serbia EUR/sqm/month 17.0 3.0 3.0 p 15.5 9.00% -50 -50 tu

Bratislava Slovakia EUR/sqm/month 14.5 0.0 0.0 tu 11.0 7.50% 0 0 tu

Barcelona Spain EUR/sqm/month 17.5 0.0 -2.8 tu 14.0 6.00% -25 -50 q

Madrid Spain EUR/sqm/month 24.8 1.0 0.0 tu 22.3 5.50% -50 -75 tu

Stockholm Sweden SEK/sqm/year 5,650.0 0.9 0.9 p 4,700.0 4.50% 0 0 tu

Geneva Switzerland CHF/sqm/year 835.0 -1.8 -5.1 tu 590.0 4.50% 25 25 tu

Zurich Switzerland CHF/sqm/month 65.0 0.0 4.0 tu 43.0 3.60% -20 -20 tu

Istanbul Turkey USD/sqm/month 45.0 0.0 0.0 q 31.0 7.00% 0 0 tu

Kyiv Ukraine USD/sqm/month 32.0 -8.6 -8.6 q n/a 12.00% 100 100 q

Abu Dhabi United Arab Emirates USD/sqm/month 39.0 0.0 1.0 tu 30.8 10.00% 0 0 tu

Dubai United Arab Emirates USD/sqm/month 51.8 10.4 17.7 tu 34.5 10.00% 0 0 tu

Belfast United Kingdom GBP/sqft/year 14.0 0.0 0.0 tu 12.8 6.25% 0 0 tu

Birmingham United Kingdom GBP/sqft/year 28.5 0.0 3.6 p 22.0 5.75% 0 -25 tu

Bristol United Kingdom GBP/sqft/year 27.5 0.0 0.0 tu 24.0 6.25% 0 0 tu

Edinburgh United Kingdom GBP/sqft/year 27.5 0.0 0.0 p 21.0 6.00% 0 0 tu

Glasgow United Kingdom GBP/sqft/year 29.0 0.0 0.0 tu 27.0 6.00% 0 0 tu

Leeds United Kingdom GBP/sqft/year 27.0 3.8 3.8 p 21.0 6.25% 0 -25 tu

London – City United Kingdom GBP/sqft/year 60.0 0.0 4.3 p 50.0 4.50% -25 -75 tu

London – West End United Kingdom GBP/sqft/year 120.0 0.0 9.1 p 92.5 3.75% 0 -25 tu

Manchester United Kingdom GBP/sqft/year 32.0 6.7 6.7 p 25.0 6.00% 0 0 q

* German, Dutch and Spanish prime yields are gross, not net.

Copyright © 2014 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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