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News Release

London - Moscow

Rising Vacancy Puts Downward Pressure on Europe’s Office Rents

According to Jones Lang LaSalle’s Q2 2009 European Office Clock

London - Moscow, 5 August 2009 – According to Jones Lang LaSalle’s Q2 2009 European Office Clock Report prime office rents declined by 4.6% over the quarter, and now stand on average 15.4% lower then Q2 2008. The Index, which is based on 24 markets, shows that Moscow witnessed headline rental falls of 30%, followed by Dublin (-18%) and Madrid (-10%) over the quarter. London has experienced a year-on-year fall in prime rents of -32% and potentially has now reached the peak of rental decline. The overall European vacancy rate increased 80 basis points to 9.3%.
Chris Staveley, Head of Jones Lang LaSalle’s Cross Border team, commented: “Despite early signs of improvements in economic and business confidence a significant proportion of occupiers across Europe are still reducing staff numbers and seeking to avoid the costs of relocation. While some tenants are looking to take advantage of current market conditions and secure high quality space in better locations, overall office demand remains low across Europe.”
Office leasing volumes in Q2 2009 increased 9% from the previous quarter to 2.1 million sq m but sit 35% below Q2 2008 levels and nearly 30% below the five-year average. Take up in Central and Eastern Europe (CEE) increased to 0.6 million sq m and now stands 14% above the five-year average. Some significant increases in take up over the quarter were also reported in larger western European markets, notably Brussels (+51%), Madrid (+46%) and London (+43%), though they are based on comparatively low absolute numbers.
Although completion levels across Europe remain 30% above the five-year average, few new office developments commenced during Q2 2009. Despite difficult leasing conditions 1.9 million sq m of space was completed and added to the market, but this represents a 10% decrease over the quarter with several projects being cancelled or postponed. In the CEE region the average vacancy rate increased significantly to 14.6%, the highest level since 1999, while the Western Europe average rate reached 8.8%. Dublin recorded the highest vacancy rate (21.2%), followed by Moscow (18%) and Budapest (15%). Luxembourg achieved the lowest vacancy rate (3.7%) whilst Paris and London were among the markets with vacancy rates below the European average.
“With another 4 million sq m of space due for completion this year and with office demand expected to remain weak vacancy rates are going to continue to increase further over the year - the overall European vacancy rate could exceed 10% by the year end”, concluded Staveley.
Olga Rybakova, Head of Office Research Jones Lang LaSalle: “We saw a rebound in demand for office space in Moscow in Q2. However the take-up level remains well below the pre-crisis volumes. Active supply growth, combined with weak demand, led to vacancy rate increase to 18% and put more pressure on rents. Rental rates decreased by 30% during Q2 2009, to $700/sq m/year. With sizeable new space coming to the market in the near future, the vacancy rate is bound to grow, while rents have likely gone through the adjustment phase. We expect gradual stabilization of prime office rents in H2 2009.”
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $41 billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008 and 2009 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.
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