Europe office construction hits decade low as rents rise
European office construction fell to a decade low last year. High costs and a supply crunch are now driving prime rents in major cities to record levels.
Construction of new office space in Europe has slumped to its lowest level in a decade, creating a supply crunch even as rents in prime locations hit record highs. According to a report by Cushman & Wakefield plc, the total space under construction fell to 10.1 million square feet at the end of last year, the lowest level since 2016. This decline is largely attributed to the impact of high construction and financing costs, which have slowed new developments despite a resurgence in demand.
As companies increasingly require staff to return to physical offices, high-quality workspace in major cities like London and Paris is filling up again. This trend has supported 20 consecutive quarters of rental growth for prime European offices. In London, demand for new office space is currently estimated at over 11 million square feet, approximately 20% above the long-term average. Consequently, nearly a third of occupiers are expected to remain in their current premises due to a lack of available alternatives or high prices.
