Pre-leased office space in H2 down 50%

“The decline in demand and newly proposed projects scheduled for delivery in H2 2009, which total some 270,000 square meters (constructed surface), will maintain the downward pressure on the level of rents for the second half of this year. However, the pace of decline will be slower than in H2 2008 and the first half of this year due to owner resistance and the fact that the profitability limit for their investments has been reached,” the BNP Paribas Real Estate study indicates.

Rents charged in the first six months of this year dropped 10-15 percent for all types of buildings, in all areas, with sharper declines for offices located uptown. Moreover, BNP Paribas Real Estate specialists said that owners are increasingly offering incentives, which has led to the 10-15 percent drop in base rents and a 20-25 percent decline in net effective rent.

“In the first half of this year, the office market continued the downward trend in rents initiated in the second part of 2008, given the sharp decline in demand and the rise in the number of properties available on the market,” the authors of the study said.

In the first six months of this year, the average rent charged for A class offices located downtown was a monthly €18-€20 per square meter. For B class properties located in attractive areas, rents ranged from €12-€16/sqm/month, while those for offices located in secondary areas amounted to €10-€12/sqm/month. Uptown, where transport network coverage is low, rents charged varied between €9-€11/sqm/month, in spite of the high quality standard of buildings in that area.

According to the study, the standard period for lease contracts signed in the first six months in 2009 was three years.