Europe Office Real Estate Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Europe Office Real Estate Market is segmented by Geography (Germany, United Kingdom, France, Italy, Spain, Russian Federation, and Rest of Europe) and Sector (Information Technology [IT and ITES], Manufacturing, BFSI [Banking, Financial Services, and Insurance], Consulting, and Other Services).

Market Snapshot

Europe Office Real Estate Market Forecast
Study Period: 2018-2027
Base Year: 2021
CAGR: 4 %
Europe Office Real Estate Market Major Players

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Market Overview

The Europe office real estate market is poised to register a CAGR of 4% during the forecast period (2022 - 2027). The office real estate market in Europe is relatively fragmented. The market is anticipated to bounce back to normalcy by the end of 2022.

The performance of the European office real estate market is strongly connected to the growth of the region’s economy. Though the European economy is recovering from the consequences of the COVID-19 pandemic, the office real estate industry may take some time to reach normalcy.

Occupier demand has slowed, and uncertainty has increased, resulting in a 40% drop in office take-up in 2020 compared to 2019. Offices were not expected to be fully occupied until at least the end of 2021. However, as uncertainty related to the pandemic lessened, take-up was projected to increase by 7% in 2021 over 2020. Barcelona (59% p.a. in 2020-2021), Paris Central Business District (CBD) (52%), Cologne (42%), and Central London (29%) are estimated to see a faster recovery in office leasing activity.

Scope of the Report

Office real estate is the construction of buildings for leasing and selling purposes to companies from different sectors. This report aims to provide a detailed analysis of the Europe office real estate market. It focuses on the office real estate sector's market insights, dynamics, technological trends, and government initiatives. Also, this report covers segmentation by geography (Germany, United Kingdom, France, Italy, Spain, Russian Federation, and Rest of Europe) and sector (information technology [IT and ITES], manufacturing, BFSI [banking, financial services, and insurance], consulting, and other services). It analyzes the key players present in the market and the competitive landscape in the office real estate market in Europe.

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Key Market Trends

Offices Remain a Core Sector

Although the COVID-19 pandemic has changed the way people work, there is still a high demand for office space. According to INREV, a European organization that shares knowledge on the non-listed real estate business, offices are still a favored asset category for European investors, particularly those headquartered in France and Germany.

Prime rents increased by 0.5% on average in Q3 2021, following increases of 0.3% in Q2 2021 and 0.1% in Q1 2021. For the first time since the pandemic in Q2 2020, annual growth has been positive, with rents being 0.3% higher Y-o-Y. No markets saw a decrease in rentals throughout Q3 2021. Yields continue to fall, albeit slowly, with the European prime yield falling by 3 basis points to a new low of 4.16% in the third quarter.

Europe Office Real Estate Market Trends

A Rise in Rental Prices of Office Properties in European Cities

The office market has historically been the most popular asset type among real estate investors, accounting for 40-50% of total investment volume. The major share of European investment activity is concentrated in Paris and London, as well as Germany's big four (Berlin, Frankfurt, Munich, and Hamburg). Central Paris garnered EUR 3.8 billion in investments in Q2 2021, which was EUR 500 million higher than Central London. The London Stock Exchange is one of the world's largest foreign exchange markets, and many major global companies, such as HSBC, BP, Unilever, and Barclays, are headquartered in this region. London’s office real estate sector has historically been one of the most competitive, with prime yields as low as 3.5% as of Q3 2020. Yields in Germany's big four were significantly lower, at less than 3%.

Europe Office Real Estate Market Analysis

Competitive Landscape

The office real estate market in Europe is relatively fragmented. The market is anticipated to regain normalcy by the end of 2022. Companies are gearing up to meet future needs, and many companies are entering the market for further opportunities. Some of the office real estate developers in Europe are Hochtief Aktiengesellschaft, Koninklijke Bam Groep, NCC AB, Balfour Beatty, and Strabag.

Recent Developments

In December 2021, EPISO 5, a fund managed by Tristan Capital Partners, purchased a 6-building office campus located on the eastern side of Paris in Charenton-le-Pont from two French institutional investors in a share deal. The 46,500-sq. m. property is fully let to blue-chip company Natixis, a subsidiary of Group BPCE. The campus boasts an array of amenities, including a gym, two double-height auditoriums, a library, a wellness center, a training academy, a company restaurant and cafeterias, and a tennis court, along with a 1,000 sq. m. garden, patio space, and terraces.

In December 2021, CBRE Investment Management acquired Exchange Place One, a Grade-A office building on Semple Street in Edinburgh, from a fund managed by Macquarie Asset Management. The property comprises 114,748 sq. ft of office space spread over ground and five upper floors, a basement car park, and one ancillary retail unit. The space offers impressive views of Edinburgh Castle, good floor-to-ceiling heights, and high levels of natural light, as well as large, flexible floor plates of 20,000 sq. ft.

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions

    2. 1.2 Scope of the Report

  2. 2. RESEARCH METHODOLOGY

    1. 2.1 Analysis Methodology

    2. 2.2 Research Phases

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET INSIGHTS

    1. 4.1 Market Overview

    2. 4.2 Technological Innovations in the Office Real Estate Market

    3. 4.3 Government Regulations and Initiatives in the Industry

    4. 4.4 Insights into Rental Yields in the Office Real Estate Segment

    5. 4.5 Insights into the Key Office Real Estate Industry Metrics (Supply, Rentals, Prices, Occupancy (%)/Vacancy (%))

    6. 4.6 Insights into Office Real Estate Construction Costs

    7. 4.7 Insights into Office Real Estate Investment in Europe (in Major Cities)

    8. 4.8 Impact of the COVID-19 Pandemic on the Market

  5. 5. MARKET DYNAMICS

    1. 5.1 Market Drivers

    2. 5.2 Market Restraints

    3. 5.3 Market Opportunities

    4. 5.4 Porter's Five Forces Analysis

      1. 5.4.1 Bargaining Power of Suppliers

      2. 5.4.2 Bargaining Power of Consumers/Buyers

      3. 5.4.3 Threat of New Entrants

      4. 5.4.4 Threat of Substitute Products

      5. 5.4.5 Intensity of Competitive Rivalry

    5. 5.5 Industry Value Chain Analysis

  6. 6. MARKET SEGMENTATION

    1. 6.1 Geography

      1. 6.1.1 Germany

      2. 6.1.2 United Kingdom

      3. 6.1.3 France

      4. 6.1.4 Italy

      5. 6.1.5 Spain

      6. 6.1.6 Russian Federation

      7. 6.1.7 Rest of Europe

    2. 6.2 Sector

      1. 6.2.1 Information Technology (IT and ITES)

      2. 6.2.2 Manufacturing

      3. 6.2.3 BFSI (Banking, Financial Services, and Insurance)

      4. 6.2.4 Consulting

      5. 6.2.5 Other Services

  7. 7. COMPETITIVE LANDSCAPE

    1. 7.1 Company Profiles

      1. 7.1.1 Hochtief Aktiengesellschaft

      2. 7.1.2 Koninklijke Bam Groep

      3. 7.1.3 NCC AB

      4. 7.1.4 Balfour Beatty

      5. 7.1.5 Strabag

      6. 7.1.6 Skanska

      7. 7.1.7 Eiffage

      8. 7.1.8 Vinci Construction

      9. 7.1.9 Covivio*

    2. 7.2 *List Not Exhaustive

  8. 8. RECENT DEVELOPMENTS

  9. 9. APPENDIX

  10. 10. DISCLAIMER

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Frequently Asked Questions

The Europe Office Real Estate Market market is studied from 2018 - 2027.

The Europe Office Real Estate Market is growing at a CAGR of 4% over the next 5 years.

Hochtief Aktiengesellschaft, Koninklijke Bam Groep, NCC AB, Balfour Beatty, Strabag are the major companies operating in Europe Office Real Estate Market.

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