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LONDON-The seven-year decline in office vacancy rates in Europe’s main office centres has come to an end, according to new research from agent DTZ. By mid-2001, the average vacancy rate had risen to 3.7%, up from 3.3% at the beginning of the year. This rise is the first since 1994 when the vacancy rate peaked at around 9%.

DTZ blames the rise on softening occupier demand as a result of economic uncertainty and difficult trading conditions in the IT sector. But the report also notes that occupiers became more reluctant to take space after strong rental growth last year. In 2000, prime office rents rose by 60% in Paris, 50% in Stockholm and 47% in Zurich for example.

Although new supply is picking up, development activity is generally lower than at the peak of the last property cycle. And in many markets, a large proportion of space under construction is pre-committed. In addition, most available space is of secondary quality.

This scenario–with falling demand and rising supply–is beginning to impact on office rents. Rents are at best stable in most markets, and in some cases prime levels are beginning to fall. David Hughes, Head of DTZ’s corporate real estate arm EuroCRES said: ‘Securing quality office space in many European cities has been difficult in recent years. This increase in availability will hopefully lead to a welcome increase in choice for occupiers and will also reduce pressure on rents, which have risen rapidly in many markets.

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