The View 9

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Split of Take-up by Occupier Profile

Source: BRF, CBRE Research

OUTLOOK New office supply looks set to spike up again in 2020 after last year’s low volume, although this will not bring much new availability to the market as 70% of the expected volume is already pre-let. Overall, ca. 60% of the total ongoing office pipeline is committed. Risks regarding timely delivery persist as construction sector capacities are still strained. Demand is expected to remain strong this year, though softening somewhat from the record volume seen in 2019 as a renewal wave of similar magnitude is not likely. Take-up will still be driven by pre-leases as availability in the existing stock keeps diminishing. Based on the already high pre-lease ratio across the 2020 pipeline, we expect continued strong net absorption once these commitments convert to physical occupancy upon completion. Hence, the vacancy rate is expected to decline further. While we see continued upward rental pressure ahead, the appreciation will slow. Pipeline projects are ambitiously priced, and meaningful further potential value can be unlocked by exploiting more central or unique locations. Pricing in the existing stock still lags behind by a comfortable margin, which could allow for further appreciation across stock benefitting from sensible quality and size.

Range and Average Asking Rent Level by Office Submarket (excluding pipeline)

Source: BRF, CBRE Research