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Location remains the dominant driver on European office real estate decisions

Location will remain the most important factor when investors and occupiers make decisions about office space, according to Jones Lang LaSalle Offices 2020 research, but quality is gaining ground.

Whilst cost and the quality of available space are rapidly rising up the agenda, location will continue to outweigh these concerns and become even more important. The estates and investment professions expect to see rental premiums for location of up to 70% commonplace in many Western European countries.

  • Location remains the dominant driver, with ‘access to talent’ of growing importance for corporates.
  • However, the quality of real estate will also grow in importance and the winning formula is about achieving the right fit-out for the right location and occupier.
  • European prime rents in core locations on average 40-70% higher than secondary rents
  • London, Paris and major German cities see largest prime premium of between 60-85%
  • Whilst CBD (central business district) developments record considerably higher rents in 75% of markets, the savings gained in less central locations might represent false value as a company’s recruitment, retention, branding and strategy risks being adversely affected.

Source: Jones Lang LaSalle

Bill Page, Head of EMEA offices research, said:

“Corporate occupiers are looking to maximise space utilisation and fit-out to improve efficiencies. But an increasingly strategic approach to recruitment, retention, brand and client access means location is growing in importance. The battle for the right space in the right place will rage on.”

Investors and occupiers are increasingly using sophisticated analysis to determine the best locations across Europe and within markets. Smart occupiers will be prepared to pay a premium for the right space in the right location, as they can see the payback it will deliver to strategy. Investors who examine changing occupier trends and changing transport infrastructure will be better prepared for success. A knock-on effect of the increasing importance of location is the opportunity to unlock value through refurbishing assets in core areas.

Beno__t du Passage, managing director – France and Southern Europe, Jones Lang LaSalle and executive sponsor of the client research project commented:

“Office buildings in central areas command higher liquidity, greater income stability and stronger rental growth potential. Peripheral areas can work, especially if there is suitable financial discount on offer but only if transport links and building quality can fill the gap.”

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