In this research report, we provide our forecasts for the top 15 European destinations for office rental growth and income returns (yields) for 2020, and the average annual growth rate for the period between 2020 – 2024. All our forecast figures as denoted as a percentage.

Although the problems surrounding the landscape of Europe after the UK’s exit from the European union and hence need for the re-establishment of trade deals has still yet to be finalised, office rental growth still features as being paramount to investors. Our research follows 50 European cities and we have listed the top 15 growth cities. We concentrate our efforts in the ‘Prime’ Office market.

We define price office rent as: The top open-market rent that can be achieved for a notional office unit (sq m.) per month. The unit itself has to feature highest quality and is to be situated in the best location of the local market. We define Prime Income (yield) as: The yield for a property off the highest quality specification in a prime location within the area. The property should be 100% let at the market rent at the time, to blue-chip tenants, with leasing term typical for prime property within that market. The yield should reflect net income received by an investor, expressed as a percentage of total capital value plus expected acquisition costs.

We list the top 15 European destinations as investors will look to diversify their portfolios rather than rest on for example, German cities. Many investors will be looking at GDP growth cycles for the next five years to select their portfolios. To begin the research, we highlight the top 15 performing growth cities for rental growth for the year 2020 and then the top 15 cities who we forecast to perform taking their average annual growth rate for the 5-year period 2020 – 2024. Figure 1 shows the forecast for 2020 and figure 2 shows the 5-year annual growth rate.  

Figure 1

Our calculations use data comprising of office employment and real GDP. We also factor into our calculations that office rental growth is function of previous growth rates. We also concentrate on percentage changes rather than data in levels because percentage changes between the time periods provide a much better indication of changes in the growth forecasts. Our results show that Bucharest comes out on top as the city showing the highest office growth forecast for 2020 at 4.5%. This is party due to the fact that Romania as a country is currently entering the latter stages of their economic cycles and are still growing. Interestingly, 6 of the 15 top featured cities are in the UK: Glasgow, London’s West End, Edinburgh, Leeds, Manchester and Birmingham. 

Annual average 5-year growth forecast (2020 – 2024)

In figure 2, we highlight the annual average 5-year growth forecast for the European top 15 performing cities. The time period is between 2020 and 2024.

Figure 2

The top two growth cities are in the UK, Leeds at 4.4% and Glasgow at 3.6%. Edinburgh completed the top 5 for UK cities in 5th place with a growth rate of 3.2%. Bucharest, although forecasted to be the highest European growth area for 2020, shows a 3.2% average annual office rental growth for 2020 – 2024.

European Economic Growth and Office Based Employment

To better illustrate the performance of the European Prime Office rental growth series, it is important to show Europe’s GDP and office employment growth rates. Figures 3 and 4 below show the combined GDP growth rates for 50 European cities. The trend line is shown by the dotted red line which is a moving average of the change on GDP growth and office-based employment.

Figure 3

The European GDP growth rate show modest increases year on year since the end of the financial crises in 2012. The falls after 2017 can partly be explained by a reduction in investor confidence arising from the UK’s exit from the European Union after the vote in 2016. The forecast for the Eurozone should be approximately 1.5%, however, the broad nature of series to date depicts a healthy office rental market, and Europe still holds as a favourable destination for European cities for investment.

Figure 4

As with the GDP growth series, the office-based employment is a useful economic indicator to show how the office market is performing. The peak in office-based employment was reached in 2014 with a gradual decline thereafter. The office-based series is shown here because this is a major economic driver of our rental growth predictions. Strong office-based employment as shown here, together with the GDP data provides investors with confidence in the office market, particularly the Prime Office market which is in a healthy position for investments.

The Individual Cities (historic growth and forecasts)

Below, we graphically illustrate the 15 European cities’ growth rate forecasts. The historic rate is shown by the blue line with the forecast shown by the dashed orange line.


The city of Bucharest features as the top performing rental growth city in our analysis in Europe. Here, the investment market had the same volume of transactions year to date in April 2019 where the figure reached approximately €120 million. This is expected to increase fivefold by the end of this year. GDP growth in Romania continued its increase during 2019, and this is expected to continue but at a slower pace. The coronavirus impact on the real estate market is dependent on government intervention activity and its response to the growing concerns. With the volume of debt being much lower than in previous difficult economic times such as the financial crisis, the optimism in the current market should be justified, but one will still need to watch the market carefully, and hope that liquidity in the market at present levels are maintained.


One of the main reasons for the higher rental growth values in Glasgow is the lack of availability in prime rental space. This supply issue leads to the higher prices in office rents. 2019 saw some strong deals in the market with a few high-end businesses targeting prime listings. The most significant sector taking up prime office space was the banking industry, many relocating some of their premises to Scotland. With Glasgow’s Prime Office space under construction and an approximate 85% take up rate, much of the development has benefitted from a city centre location, which is good news for businesses and landlords.


Throughout Europe generally, office rents have been increasing and this is accompanied by broad economic growth. The availability of office space is the leading factor of rental growth. However, with many vacancy rates declining since 2010, Helsinki seems to have escaped this decline where their office vacancy rates are increasing. However, due to recent occupier demand, we see rental growth increasing from 2021, and this has been accompanied by much needed office development. This is also followed by lower interest rates which is an attractive proposition for investors, even though this does not provide higher yield returns.

London West End

With leasing as strong as it is in this part of the UK combined with lower levels of office supply, it is expected that the West End of London will experience rental growth this year and for the next five years. It is hoped that the containment of the coronavirus is paramount as will be a successful transition out of the European Union. With London being the central business region, these factors become important. Another important issue is the UK’s access to the financial markets through a phenomenon called the ‘method of equivalency’. If this is curtailed, then we may see a lowering of our 5-year forecast.


Edinburgh is in the same position as its Scottish counterpart, Glasgow, and with the exception of 2019, Edinburgh has seen rental growth increases in recent years. We forecast a growth period in the next few years as Edinburgh has experienced a major supply problem which increases rental growth values. There is limited development in Edinburgh and with increasing demand, rental prices have increased, pushing Edinburgh higher up the European ladder for rental growth.


The Prime Office sector is expected to continue to perform well in the Yorkshire region, led by Leeds. The city had high levels of investment volumes in the city centre in Q4 2019. Throughout 2019, there has been a lack of stock and with demand for the city offices rising, the rental values have seen increases, regardless of the ongoing political and economic uncertainty in the UK. Offices located in sought after areas will be targeted by investors and this has been prominent in 2019 and is set to continue for 2020.


Unsurprisingly, Bratislava’s city centre experienced the strongest growth in 2019, more that the inner or outer city areas. With Slovakia’s GDP growth expected to continue, investment opportunities and optimism remain. Slovakia’s unemployment problem has stabilised, fuelling more cause for more optimism. There are many A grade projects on the horizon for 2020, and this should lead to a healthy office growth rate for this year.


Ireland’s commercial property sector is driven by a combination of domestic and international issues and business confidence. For example, the issues surrounding the UK’s exit from the European Union were first thought to have halted investment, particularly from London to Ireland, however, there has been an increased presence of international firms. This has led to increased activity in the office market to a certain degree. In Dublin, as office buildings have been completed, the expected demand has not been realised, and thus we have factored this into our calculations.  We forecast a 5-year average year on year growth rate of 1.1%.


The take up of Manchester city offices spaces so far in 2020 has exceeded that of the first three quarters of 2019. Rising activity predominantly from tech businesses has means that office rents are set to have a healthy growth for the next five years. There are relatively little demand and supply imbalances in Manchester as demand meets supply. Rents are expected to exceed their 2019 values for the year 2020, also rising in 2021. Demand from investors is still expected to be buoyant in all sectors, especially in the Prime Office market.


Marseilles is a city suffering from a lack of available office space and the city is waiting for project developments to rectify this issue. Benefitting from European economic prosperity in recent years, demand is there, however, supply is not, and this leads to increases in rental growth values. This growth is in contrast to the lack of deals in Prime Office space in 2019. We do see a 5-year growth forecast for 2020 – 2024 of 3.2% year on year.


Warsaw has seen a rise in the Prime Office market due to the higher take up rate and therefore falling vacancy rate. Office completions to meet the rising demand for office space will be a key feature in 2020 with completions due in 2021. The Warsaw office leasing market has also risen and is meeting demand targets with many office spaces already signed up. The market looks in a good position to meet its leasing capacity by the end of 2021.


Oslo’s office take up rate reach respectable levels in the first 3 quarters of 2019 and the forecast for take up levels in 2020 looks to be at least another 10% higher. Rents rose for the whole of 2019 and although there were lower vacancy rates, rents still managed an upswing. With the Scandinavian economies outperforming the rest of Europe, Oslo can look forward to a healthy 2020, although we forecast that the year in the Prime Office rental growth space may not be as prominent of that of 2019. We forecast the year on year 5-year average annual growth to be 2.9%.


Lyon has seen a respectable rise in rental growth in the Prime Office market with a year on year increase of 8.3% in 2019. We forecast a positive growth rate for 2020, however, not to similar levels of the 2019. Private office desk prices in Lyon are half the price of their French counterparts, for example, the prices of the same spaces in Paris. We forecast the 5-year cycle in Lyon at 3.1% annual average growth rate.


The take up rate for office space in Birmingham surpassed 1 million square feet which is the best record in the city’s history. Most of this was grade A listing space with the remainder listed as prime rent. In 2019, the city experienced an increase in the numbers of available office rental space, and with the addition of completed buildings, supply increased which keeps the rental growth values at modest levels rather than at the higher end. Birmingham is seen as an attractive proposition to investors, and this has increased the investment volumes between 2018 and 2020. Birmingham has also developed a reputation for attracting tech firms to the city which provides a significant lift to the city’s economy.


The forecast for Lisbon’s office take up rate is set to be similar to the rate of 2018. Some of the city centre’s office stock has been converted into residential property. The response to the demand for office space has mainly concentrated in the Western Corridor. There are new projects in the pipeline which would assist in solving the supply problem and with this in mind, we forecast a moderate rental growth figure for the 5-year in year annual average.

Income Returns (Yields)                                                                                                   

We use a variety of economic explainers to derive our forecasts for our income (yield) results. For example, we look at the individual cities’ short and long-term interest rates, the inflation rate, the investment volumes, previous yields and the real rent ratios. We use these economic drivers to calculate the income returns on investment. Below in figure 5, we show the income return forecasts for the 5-year average annual growth rate.

Figure 5

In the latter part of 2019, office yields in Europe fell by approximately 10 basis points (0.1%). Surprisingly, London was seen as a suitable investment proposition despite the uncertainties surrounding the UK’s exit from the European Union. German cities were seen as safe value in the third quarter of 2019. Some cities will continue to see compressed yields due demand outperforming supply in the Prime Office sector in 2020, however, most of the main cities will see stable growth.

Although the office employment growth levels across Europe have been relatively strong in recent times, we see a slight weakening in growth in the coming years as economies reach capacity and therefore as productivity levels off, businesses will be looking for more suitable methods of regaining their previous productivity levels. This may include the adoption of flexible office working. Our chart in figure 5 shows the office yields for 2020 – 2024. 7 of the UK cities feature in this forecast. Eastern European cities feature at the apex of the listing with 5-year averages in Sofia leading the group. The Prime Office landscape will see less development across Europe due to these costs eroding rental growth.

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