Savills: 4.6m sq m of new European office space to be delivered this year

Barcelona (8.1%), Bucharest (5.7%) and Berlin (5.4%) are the cities with the highest proportion of speculative space as a percentage of current stock. However, Berlin’s vacancy rate remains low at 3.3% so is more sheltered to the level of new deliveries. Barcelona and Bucharest have vacancy rates in the region of 10%, indicating they are likely more exposed to the higher levels of new office deliveries, although this will provide occupiers with much-needed ESG compliant space over the next two years.

Mike Barnes, Associate Director European Research at Savills, says: “Across the European cities we monitor, new speculative space under construction during 2023/24 accounts for an average of 2.6% of total office stock, which we expect will be absorbed by 2024.

“In 2022, European office take up reached 2% above the pre-pandemic average and although we anticipate a weakening in demand in 2023, competition for prime stock will remain high, and any rise in headline vacancy rates will be accounted through secondary stock being returned to the market.”

Savills anticipated that 5.4 million sq m of office development would complete in 2022. Yet the international real estate advisor’s latest data shows that only 4.5 million sq m of space was actually delivered last year.   

Simon Collett, Savills Head of Building & Project Consultancy, UK and EMEA, adds: “17% of European office development scheduled for completion in 2022 has been pushed back into 2023/24, with the Czech Republic, the Netherlands and Belgium indicating the highest construction job vacancy rates of the countries we have analysed.

“Given continual delays to source materials and labour, along with uncertainty over debt costs, it is more than likely that completion dates will be pushed back further. Due to relatively low prime vacancy rates, particularly across core western European office markets, we expect local developers will be seeking to comprehensively refurbish well-located older stock in order to capture rental uplift.”

To read the full report, please visit:

https://www.savills.com/research_articles/255800/346171-0