Global Capital Markets – Insights & Outlook: Offices, June 2023

Global office markets bifurcate on fundamentals and pricing

Our latest Global Insights & Outlook Office Report finds that varying return to office approaches post-COVID, underlying fundamentals of city functionality, approaches towards ESG-compliance differences and how markets have reacted to shifts in inflation and interest rates have created significant divergence in office investment volumes, pricing, and appetite globally. In Europe, vacancy sits at a steady 8.1% and office occupancy rates have largely returned to pre-pandemic levels of 65% on average across Europe.

But Europe’s office vacancy figures mask the varying performance within countries. The standout strong performing locations so far in Q2 2023 were:

  • London’s West End, which held steady with a vacancy rate of 6.8%
  • Amsterdam recorded a drop in vacancy to 6.1% from 6.5%
  • Brussels recorded a fall in vacancy to 7.7% from 8.3%
  • Paris saw vacancy rise by only 0.6% to 8%
  • Berlin’s rate crept from 3.1% to 3.7% vacancy

Another key takeaway from the Global Insights & Outlook Office Report is that prime rents across Europe are increasing as the demand for higher-quality space, particularly for assets that are ESG compliant, is significant. “We are seeing pressure to repurpose space that doesn’t meet contemporary demands as a growing proportion of buildings face obsolescence,” said Luke Dawson, Head of Global and EMEA Capital Markets at Colliers. “This is driving a shift in value-add plays across key markets, especially where high importance is placed on ESG, such as the UK and Australia.”

“Investing in office real estate has become more complex as the factors influencing markets are so diverse. While broader pricing continues to adjust, it will take time for appetite in offices to re-balance,” concluded Harrington.

To learn more about how the European office market is performing and how it compares with the rest of the globe, read our latest Global Insights & Outlook Office Report