Prime office rents across Europe continued to grow modestly in the second quarter of 2011, according to Jones Lang LaSalle’s latest European Office Clock report.

The index revealed a 2.1% increase over Q2 2011 based on rental growth in eight index markets, with Moscow topping the chart (+20%), followed by Warsaw (+13.6%) and Lyon (+8.0%). More modest rental growth was witnessed in some of the German markets (Munich +3.4%, Berlin +2.4%, Hamburg +2.2%) as well as London’s West End (+2.7%) and Stockholm (+2.5%).

Debt pressures and significant austerity measures continued to place downward pressure on office rents in markets such as Madrid, Barcelona, Dublin, and especially Athens, which saw further rental decline, the report said.

´Europe’s economic recovery has continued throughout the second quarter but the ongoing and increasing uncertainty about the Eurozone debt crisis and potential associated risks have softened the short term economic outlook,´ said Bill Page, head of EMEA Office Research at JLL. ´This, plus wide national economic variations, is mirrored in Europe’s office markets with a two-speed market now in place.´

Page said the Nordics, Germany and increasingly France support the emergence of expansionary demand, whereas occupiers in Greece, Portugal, Spain and Ireland remained very cautious. European vacancy rates continued their downward trend but fell by just 10bps to 10.2%, having remained in the double-digits since Q4 2009.

Much of the supply is second-hand stock released by occupiers who have upgraded over recent months and this grade of space continues to trade at a significant discount, the research showed. In Q2 2011, only about 670,000 m2 of new office space completed across Europe which is a record low and more than 50% below the 10-year average.

´For the full year we expect about 3.9 million m2 of office space to complete which includes pre-lets,' Page said. 'This is the lowest volume in more than a decade and this factor is expected to drive rental growth further in many markets and keep absorption healthy.´