The majority of European office rental markets either saw a boost or remained static in the first half of 2014, led by Germany and Holland.

Overall Europe’s leasing market reported positive growth across 17 major office markets as the Eurozone economy continued its recovery drive with improved sentiment across the region, according to Colliers International’s latest EMAE office report.

Prime rents in 85% of office markets across Europe and the Middle East reported a boost in the last six months or remained static, the report confirms.

Most notably, the office market in Germany saw the strongest growth, with prime CBD rents in Stuttgart leaping 25%. Munich also reported rental increase for the seventh consecutive half since the second half of 2010.

Amsterdam also reported an upward trajectory of rents over the last 18 months, underscoring the recovery of its prime office district amid an increasing gap between primary and secondary markets in the Netherlands.

The investment market was also a positive story for Amsterdam, which saw prime yields moving in by 40 bps compared to end 2013, along with a sharp increase in investment volumes.

‘The progressive results in rents are a result of a combination of economic improvements and greater confidence in the European occupier markets, especially the UK and Germany. This is combined with a generalised lack of modern space available in central business districts due to low volumes of new speculative completions,’ said Bruno Beretta, senior research analyst for EMEA at Colliers International.

Even Southern European markets like Madrid and Lisbon, with the former experiencing a particularly severe correction since 2009, have seen prime rents move ahead. Lisbon reported an annual rental increase of 1.4% in the first six months of 2014.

Despite these increases, a more sustainable recovery of occupational markets in Southern Europe is not expected until the end of this year, or more probably 2015.

‘Increasing demand by media and tech occupiers across EMEA, together with the shortage of new supply have created a climate for sharp rental growth in many European markets, both at headline levels and for average second hand accommodation,’ said Craig Satchwell, head of EMEA offices at Colliers International.

‘Media and Tech companies are the second most active when it comes to take up, with a 21% share of take up across London, Paris, Amsterdam and the big six German cities combined,’ he added.

The Colliers report shows that the European Central Bank’s recent moves, the weight of capital now targeting European real estate and rental growth expectations contributed, in most instances, to stable or falling office yields in the first half of 2014.

As a result, these factors have led to an upgraded perception of the European investment market. Given current high levels of interest in many major European markets, yield compression was observed in many peripheral markets like Dublin with a fall of 75 bps, Madrid down 50 bps, Barcelona down 25 bps) and Athens down 25 bps.

Prime yields hardened in a number of cities…