European office take-up reached 1.6m sq m in Q2 2024 – a 9% increase on the same period last year, according to the latest data from Savills.
Office leasing activity in H1 2024 hit 3.7m sq m – a 5% increase on the same period in 2023, but down 7% on the five-year average.
In H1, Prague (45%), Lisbon (40%), London City (25%), Barcelona (11%) and Madrid (9%) all reported take-up activity above the five-year average.
The banking, insurance and finance sector accounted for the 25% of leasing activity in H1 2024, up from 17% in H1 2023. In the City of London the sector accounted for 34% of activity compared with 26% in H1 2023.
The professional and business services sector was the second busiest group, accounting for 22% of activity in H1 2024 – down on the 28% recorded in H1 2023.
European office vacancy rates rose marginally from 8.6% to 8.8% during Q2 2024, partially due to the return of some secondary stock to the market, according to Savills.
Christina Sigliano, EMEA head of global occupier services at Savills, said: “Overall, office leasing activity across Europe so far this year is up on the same period last year, although there are some variations between cities. Some of this is due to a lack of suitable stock, with many tenants renewing their existing tenancies rather than settling for space that isn’t well-connected with established amenities and good sustainability credentials.
“For this type of space we are often also seeing longer leases being taken, as occupiers who are able to secure prime space are choosing to commit for a longer term. Others are being driven more by corporate strategies: some firms have temporarily reduced their office footprint while they await more favourable economic conditions, and some more permanently in order to align with new working arrangements.”
European office investment transactions volumes in H1 reached €14.1bn, down 21% year-on-year and down 60% against the five-year H1 average of €36bn. The UK accounted for 29% of European office investment volumes, which was above the five-year average of 24%.
Average European prime office yields remained stable quarter-on-quarter at 4.9% during Q2 2024.
James Burke, director, global cross border investment at Savills, said: “We are now beginning to see in the data the correlation between where office capital values have adjusted most significantly and the markets where investment volumes are beginning to recover.
“Data shows that Spain and Norway office investment volumes appear closest to their five year average during H1 following more significant price adjustments. Across markets, there remains a gap in buyer-seller expectations, although this appears to be gradually closing, with both buyers and sellers adjusting their pricing ambitions.”
