Savills: Madrid and Paris offices appear most attractively priced in Europe
From a fair value perspective, Madrid and Paris Central Business District (CBD) are the most attractively priced European office markets, according to Savills. The international real estate advisor believes that this is due to positive real rental growth prospects, and a reduction in risk-free rates, increasing prime offices’ appeal.
On a quarterly basis, the company says that average European prime office yields have moved in by an average of 3 basis points to 4.89%. The inward movement was driven by London West End (-25 bps to 3.75%), Vienna (-15 bps to 4.85%) and Brussels (-5 bps to 4.75%).
James Burke, director, Global Cross Border Investment at Savills, says: “Contrary to what some observers might have expected given the current economic landscape, we are seeing continued motivation amongst both buyers and sellers in the European real estate market.
“Investors remain committed to executing the strategies they have put in place in order to take advantage of European markets that have repriced and which are seeing higher levels of prospective sales. In particular, we are observing a number of German and Spanish buyers targeting core European offices and nascent interest from North American private equity groups in the same asset class.”
Mike Barnes, director in Savills European commercial research team, says: “From an occupational perspective, European office markets continue to improve. Take up rose by over 8% year-on-year in 2024 and vacancy rates made their first inward movement of the cycle.
“As a result, the IPF Consensus average five year European office rental growth forecasts have risen from 2.1% to 2.4% per annum as tenants continue to compete for the best space. There is a belief among investors that real rental growth prospects are back.”