(Bloomberg) -- European office space take-up rose 9% in the second quarter from a year earlier, partly driven by the finance and insurance sector and the enforcement of return-to-work mandates.
Firms linked to finance took the highest share of leasing activity in the first half of 2024, accounting for 25% of take-up compared with 17% in the same period a year ago, according to a report from broker Savills Plc. The City of London saw its share of leasing activity jumping to 34% from 26%.
Prague, Lisbon, Barcelona, Madrid and the City of London all reported take-up over the five-year average in the first half. Professional and business services sector was the second-busiest group, though the take-up declined to 22% in the period from 28% a year earlier.
Office attendance is rising across Europe, as more and more businesses encourage their employees with mandates and incentives to return. Three-quarters of companies are now adopting a minimum attendance policy, according to broker CBRE Group Inc., helping usage of space climb steadily across the continent.
Still, many businesses are shrinking their footprint as they await more favorable economic conditions, while a lack of suitable stock is prompting many tenants to renew their existing leases rather than settling for spaces that aren’t well placed, said Christina Sigliano, EMEA head of occupier services at Savills. These factors continue to weigh on Europe’s commercial real estate sector, she added.
European office investment transactions totaled roughly €14.1 billion ($15.7 billion) in the first six months, down 21% year-on-year, as high interest rates continued to restrict deals, Savills data showed. That’s down 60% against the five-year first-half average of €36 billion. However, the UK propped up activity, driven by faster initial price adjustment and attractive yields for cash buyers.
Europe’s average prime office yields remained stable at 4.9% during the second quarter. Savills said that overall European offices remain in “fair-value territory,” although Oslo and Madrid appear the most under-priced markets relative to sovereign bond yields.
“Across markets, there remains a gap in buyer-seller expectations,” said James Burke, director of cross-border investment at Savills. However, “this appears to be gradually closing, with both buyers and sellers adjusting their pricing ambitions,” he added.
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