If no action is taken, office vacancy rates could increase substantially in Europe in the coming years, writes Paul Wessels MRICS, director Research at PropertyEU in the April edition of the magazine.
A case in point is the Netherlands, where Jones Lang LaSalle expects vacancy levels to increase to 14 million m2 over the next five years, equivalent to 25% to 30% of the total office supply. The factors underlying this trend are not unique to the Netherlands but apply to the whole of Europe. JLL estimates in total there is still nearly 26 million m2 of vacant office space across Europe, nearly double the amount when supply was most tight (Q2 2007). Supply of poorer quality second-hand space remains high in most markets and is available at significant discounts to prime space.
This strong differentiation is reflected in the behaviour of international investors who are focussed exclusively on the prime segment of the market. The prospects for secondary office buildings are far from bright, particularly since the volume of offices in use in mature Western European economies is declining. Figures from DTZ show that around 41 million m2 out of a total office supply of nearly 48 million m2 is in use in the Netherlands and this could drop to between 37 million m2 and 38 million m2 by 2030. JLL agrees that some seven million m2, or 15%, is readily available. The firm predicts that around 1.5 million m2 to two million m2 of new space will be added to the total supply between now and 2015.
This volume at least needs to be extracted from the market to prevent vacancy rates from shooting up in a shrinking office market. And even if the extra space is eliminated, vacancy rates could still increase by 100%, the JLL figures show. ‘If offices in use decline by 15% over the next five years, that would mean vacancy rates increasing to 25% to 30% for the Netherlands as a whole by the end of that period,’ the firm says. Although local circumstances vary widely, it is a trend which should cause alarm bells to ring in the rest of Europe.
The full analysis appears in the April edition of PropertyEU Magazine. Click on the link below to subscribe. | 
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