Prime office vacancy rates in selected European cities Q4 2020

Vacancy rates are a measurement of unoccupied properties during a given period and are a good indication of an area’s desirability and opportunity for development. High vacancy rates can indicate an economic downturn, a lack of demand or possibly that standards do not meet speculative renters’ needs. Low vacancy rates are in general considered a good thing as it means there is a good level of demand from customers, although low vacancy rates may also show a need for more development which is not being met.

Prime office vacancy rates in Europe

As of the fourth quarter of 2020, the German cities Berlin, Munich, and Hamburg saw some of the lowest prime office vacancy rates in Europe at 2.4, 3 and 4.1 percent respectively. For comparison, Milan, Dublin and Warsaw all had vacancy rates of over nine percent. In 2020, vacancy rates increased across European markets as the coronavirus (COVID-19) pandemic affected leasing activity.

Rents and rental yields

The high competitiveness of Germany’s big cities can also be seen in low rental yields. In fact, both Berlin and Munich ranked in Europe’s top three. Rental yields are the ratio of a property’s rent to the property value. Often low rental yields can be explained with relatively low rental costs. This is also the case with Munich and Berlin, which have prime rental costs per square meter two times lower than London City. According to real estate experts, the three cities with best investment and development prospects in 2021 are Berlin, London, and Paris.