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‘The demand is for the best office space’

John Mulqueen, Executive Director, Head of Offices EMEA, CBRE Global Investors

The biggest trend in Europe is for quality office space in the best locations, John Mulqueen, Executive Director, Head of Offices EMEA, CBRE Global Investors, told The Real Asset Day.  

‘Despite the low levels of availability, occupiers are increasingly discerning,’ he said. ‘They want the best space and in order to get it they are prepared to pay a little more. They are more demanding of their landlord, but they are also prepared to occupy the space in a more dense way’. 

Occupiers value being on one level as it’s been recognised that is more collaboration between employees if they are all on the same floor, Mulqueen said: ‘As a result being on a single floor is more important than having your own building, so from our perspective buying bigger buildings with floor plates that can accommodate a whole business is valuable’.

The idea is then to provide some of those amenities that might be shared by three or more businesses in the same building, like conference space.

‘Occupiers are certainly choosing buildings which have more amenities, so the payback is in lower vacancies and potentially higher rents,’ he said. 

Location continues to be key. ‘There is definitely a desire to be in the very best locations and you can’t overestimate the importance of traditional locations, well-connected through infrastructure,’ Mulqueen said.

New areas are developing all the time but it is important to identify the ones that will work long-term and avoid the ones that ‘when the tide goes out become the areas where vacancy levels rise’. 

There are differences between European countries, although they have all benefited from the fiscal and monetary policies of the ECB. ‘The trick is to choose the right country to invest in at the right moment’, he said.

Paris and the German cities have been attracting investors and will continue to do so in 2020.

‘There has been a lot of capital going into Paris and the five principal cities in Germany, driving yields down to levels we had not seen before,’ he said. ‘But other parts of Europe have been held back, in my view, like Milan for political reason and Madrid, which is behind in the cycle, and of course London’.

The London market should improve after muted transactions in 2019, Mulqueen said: ‘In my view it wasn’t a lack of capital but a hiatus that was created between sellers and buyers because neither wanted to blink’. Now that Brexit has happened confidence is returning to the market and deals will follow. 

‘I think 2020 will be a really interesting year for the office market, particularly in London’. 

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