United Kingdom Book a valuation Search My Account Menu FIND A PROPERTY MARKET YOUR PROPERTY FIND A SERVICE WHY SAVILLS > Savills News London offices underpriced amid recovery for Europe’s investment and occupier market SAVILLS NEWS London offices underpriced amid recovery for Europe’s investment and occupier market 22 NOVEMBER 2021 ARTICLE CONTACTS & RELATED ARTICLES London’s City and West End office markets are under-priced compared to Europe’s other gateway cities, as workers across the region return to offices and leasing activity regains momentum, according to Savills. The international real estate advisor reports that the UK capital could experience yield compression in the future given its higher rental growth prospects and a current yield discount against the five-year average. Savills compared London’s prospects against other office markets in Europe, and found that mainland Europe’s ultra-core cities had edged into “fully priced” territory, as rising capital allocations have continued to compress yields amid rising risk-free rates. Savills anticipates the prime office/government bond yield spreads will recover to pre-pandemic levels once interest rate expectations normalise in the medium-to-longer term, with Capital Economics anticipating no Eurozone rate rise before 2025. A further 12 office markets, including Helsinki, Stockholm and Brussels, appear “fairly priced” in the third quarter of 2021. Savills Research paper, Emerging European Office Themes, released today, also shows that average workplace occupancy in the region has crept to 4% below pre-pandemic levels, according to Google’s mobility data. Occupancy figures in Amsterdam (-3%) Île-de-France (-12%), Madrid (-9%), Berlin (+2%), Dublin (+0%), Stockholm (+0%), Milan (-12%) and Warsaw (+4%) look favourable considering that office occupancy in a number of cites was 80% as Covid restrictions lifted. This rising mobility has boosted office demand, said Savills, as in the third quarter of the year preliminary data for the European office markets shows take-up had increased 15% year-on-year by the end of Q3 2021 (although still down 17% on the five year average). Among improving take-up, there has been a surge in occupational demand from the advanced manufacturing and pharmaceutical sectors in 2021, reaching 13% of total take up (4% in 2020), following growth in venture capital funding into the life science sector. However, office demand is being primarily driven by professional and business services (21%) and banking, insurance & finance (18%), which remained the most dominant occupier sectors across the European markets in H1 2021. In Central London, a large number of pre-lets from legal firms drove leasing demand from the professional & business services sector to 24% of total take-up since the pandemic began, compared with the five-year average of 15%. Savills office take-up data for the City of London also shows that 45% of occupiers, which have acquired 15,000sq ft or more since the start of 2020, and were increasing their office footprint, came from the professional and business services sector. Jeremy Bates, head of occupational markets, EMEA, Savills, said: “The increase in demand can be partially attributed to such firms coming to the end of long 10, 15 and 20 year leases, in which a large scale move to new, premium office space is required with regards to attracting and retaining employees, as well as companies pushing to increase sustainability reform.” Savills data shows that more than 70% of the office properties that achieved the top 10% of rents in Central London in 2018 and 2019 had a BREEAM rating of ‘Very Good’ or better. In addition, the strong preference for “Very Good” and higher BREEAM accredited space accounted for 60% of total take-up in the UK capital from 2019 to present. In 2021, 64% of take-up in the City of London was rated BREEAM “Very Good” or higher. While in Amsterdam, the proportion of BREEAM leases achieving very good or higher reached between 20-25% in recent years. Mike Barnes, Associate – European Research, Savills, said: “The demand for sustainable offices will increase in the coming years, partly because of increasingly stringent government sustainability criteria. Landlords will have to act now by asset managing their schemes in order to meet sustainability criteria across Europe and ensure their offices do not become obsolescent.” < Back to news Recommended articles LEISURE 23 NOVEMBER 2021 Former children’s residential care home and school Harlesco… READ PRESS RELEASE DEVELOPMENT 23 NOVEMBER 2021 Savills Abigail Jones wins Young Surveyor of the Year READ PRESS RELEASE DEVELOPMENT 23 NOVEMBER 2021 Savills appointed to find partner for new mixed use quarter a… READ PRESS RELEASE Residential Property FOR SALE Property for sale Property for sale Scotland Property for sale England Property for sale Wales Property for sale in London Help to Buy in London Help to Buy in UK New developments for sale in England New developments for sale in London New developments for sale in Scotland FOR RENT Property to rent in UK Property to rent Scotland Property to rent England Property to rent Wales Property to rent in London New developments to rent in England New developments to rent in London New developments to rent in Scotland Commercial Property FOR SALE Commercial property for sale Development property for sale Industrial properties for sale Leisure properties for sale Offices for sale Hotels for sale Land for sale Industrial property for sale England Hotels for sale in England Offices for sale in England Flexible office space FOR RENT Office property to let Industrial property to let Pubs to let Rural Property Rural property for sale Farms for sale Equestrian property for sale Country estates for sale International Property for sale in Europe Property for sale in France Property for sale in the US Property for sale in Italy Property for sale in Australia Offices All UK offices UK offices by county London Offices Find an office worldwide Services & Sectors SERVICES Asset Management Buying or Selling Property Consultancy Development Finance Investment Letting or Renting Occupier Services Planning Property Management Valuation SECTORS Affordable Housing Central London Retail Education Energy & Sustainability Food and Farming Healthcare Hotels Industrial And logistics Infrastructure and Transport Leisure Minerals and Commodities Office & Business Space Public Sector Residential Retail Rural Senior Living Serviced Offices Student Accommodation Telecoms Trade-Related & Specialist Sectors Utilities Waste Management More Information Sitemap RSS Feeds Accessibility Feedback TDS Explained Provision of Services Slavery & Human Trafficking Terms & Conditions Privacy & Cookies Client Money Protection Scotland Letting Agent Code of Practice Help to Buy Calculator Stamp Duty Calculator Land & Buildings Transaction Tax (LBTT) Calculator Fees & Charges Residential Tenant Fees & Charges Residential Landlord Fees & Charges Talk to Us Find a Savills Office Find a Savills Employee Book a Property Valuation Careers with Savills Ask a Question Investor Relations All content © copyright 2021 Savills. 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