Despite ongoing political uncertainty in Russia, Moscow is now one of the leading trio of capitals in Europe when it comes to top rents and vacancy rates, according to the 3rd quarterly European real estate barometer by IVG Immobilien and Cushman & Wakefield.
Despite ongoing political uncertainty in Russia, Moscow is now one of the leading trio of capitals in Europe when it comes to top rents and vacancy rates, according to the 3rd quarterly European real estate barometer by IVG Immobilien and Cushman & Wakefield.
Prime rents in Moscow are running at EUR 46.70 and average rates are not much lower than EUR 43.30, the report said. London remains by far the most expensive city with rents of up to EUR 125.70 per m2. 'In the British capital the average rent is already as high as EUR 82.70. Within a year, it has increased 32.3%. This shows just how strong overall demand for office space is,' Bernd Kottmann, head of portfolio management at IVG, said.
Paris is the second most expensive European city will rents at EUR 58.70. Zurich is also very expensive, with a prime rate of EUR 42. The lowest rates for prime office space are in Warsaw (EUR 18), Budapest and Prague (EUR 18.50) and Vienna (EUR 19).
The barometer said the office market recovery in major European cities of the last two years is continuing. Rental turnover and prices are increasing, while vacancy rates and yields are still declining. However, the downward movement is not as strong as in previous quarters. 'For the first time, the top yield in a major European city is under 3.75% - in Madrid investors for top properties have to accept 3.75%, Kottmann said. Even though a further considerable decline in yields is unlikely, ongoing investment pressure is not out of the question, he said.
Yields for prime office properties are at all-time lows in certain European cities. Apart from Madrid, yields for sought-after prime sites in Barcelona are down to 4.25%. Yields for top-quality properties in London are at 4%, 4.5% in Paris and 4.75% in Stockholm. Moscow has the highest yields (9.5%), followed by Budapest at 6.35% and Lisbon at 6%. In Dusseldorf, yields of 5.57% are higher than the Central European capitals Prague (5.5%) and Warsaw (5.7%). Other German cities are also well above the average Western European yield of 4.75%.
'Vacancy rates have fallen to a normal level almost everywhere in Europe. In individual cases there is even a trend to shortage,' Kottmann said. Amsterdam, at 18%, has the highest vacancy rate of all the cities surveyed. On the flip side, the scarcity of office space in Moscow has pushed the vacancy rate down to 2.6%. Barcelona, Vienna and Madrid are all below 6%.