The agent said demand began weakening in Spring 2001, and in addition the level of unlet developments increased strongly during 2001. Office development activity is continuing at a high level and as a consequence the vacancy rate--which used to be one of the lowest in Europe at around 1% in 1999--is forecast to reach 7% by the end of 2002.

Amsterdam has long been a popular destination for IT companies, and their well-publicised problems hit the market hard. Cisco Systems had planned to build over one million sf to the southeast of the city centre, but halted the project after about 600,000 sf had been built. Almost 250,000 sf of this was then put back on the market. And Worldcom has also sub-let about 250,000 sf.

Office take-up is also slowing, down by 23% to 5 million sf in 2001. And Catella forecasts a further fall to 4.3 million sf in 2002. As a result rents are under pressure, with falls forecast in most sub-markets. Current top rents are €386 per sq m per annum ($31 per sf) in the Eastern district, but Catella said rent-frees are already appearing.