European Rents Fall Again

LONDON-the fist quarter bore some bad news for the industry. In that time, European office rents fell for the third consecutive quarter, according to Jones Lang LaSalle. The company’s prime office rental index for the first quarter of 2005 fell slightly to 0.4% from 0.5% in the final quarter of 2004.

Rental declines were experienced in Brussels and London’s West End (both at -3.4%), but the report added that that West End prime rents are readjusting after unusually strong growth last year.

Rents rose in Lyon (4.7%) and Madrid (1.0%). Rental values were unchanged in all other indexed cities. Considerable investment from real estate funds, equity valuations and asset-backed securities are relying on a European office rental recovery. In anticipation of recovery, there have been huge capital flows into the sector in the past few years that have pushed yields down and boosted capital values.