When the Bay Area's fast-growing Internet companies go global, the New Economy can collide with the Old World. Prime office rents in Western Europe are rising at an annual rate of 10 percent, the highest growth since 1990, according to Jones Lang LaSalle, an international real estate services and investment firm. The overall vacancy rate, meanwhile, has fallen to 4.3 percent, and vacancies have hit historic lows in a number of Western European markets. Rents for prime space in Dublin, Ireland, rose by more than 50 percent during the past year. But there's more to the European office crunch than rent and vacancy rates.
Infrastructure is an issue.
Those great old buildings that enthrall tourists in European capitals can be a nightmare for high-tech tenants. City-center buildings often need a lot of work before they can handle the demands of an Internet venture. You have to check the power supply and telecom infrastructure carefully. U.K. lease terms are typically 10 to 15 years on good quality space, and as long as 25 years in some cases in addition to exorbitant security deposits. Legge described a couple of recent deals where tenants had to shell out deposits equal to 24-months rent and service charges.