Average commercial office market occupancy costs in Europe will grow 2% year on year to 2015 but overall will remain 11.7% lower than at their peak in 2007, according to a new report published today (Thursday March 03).

Outgoings, such as property taxes and service charges are set to increase. However, occupiers will continue to benefit from substantial savings in many markets, the fourteenth edition of DTZ’s annual Global Occupancy Costs: Offices’ survey shows.

The greatest increase in costs over the next five years is expected in London’s West End and some Central Eastern Europe countries. Occupiers in Geneva and Benelux will benefit from the lowest increases in occupancy costs over the next five years.

London’s West End, Geneva and Zurich entered 2011 as three of the top five most expensive office locations globally. London’s West End is forecast to remain in second position through to 2015.

DTZ’s survey assesses the main components of occupancy costs in 121 business districts in 47 countries/territories across the globe, ranking each location based on annual costs per workstation in USD. It includes rents and outgoings, such as maintenance costs and property tax.

London’s West End will be the fastest growing market in Europe over the next five years. Recovering demand, combined with supply constraints following reduced development activity, will continue pushing up rents. This growth will see London’s West End retain its position as the second most expensive office location in the world, behind Hong Kong.

CEE will also witness above average increases in occupancy costs. Moscow is forecast to see the biggest increase in occupancy costs to 2015, at 3.8% per annum, followed by Warsaw and Kyiv. This reflects the strong economic outlook for the CEE region, combined with tighter supply of good quality buildings in the near term, the report points out.

Of the more established markets in Continental Europe, occupancy costs are forecast to increase fastest in Munich, 2.8% per annum, and Paris CBD, 2.7% per annum, where demand will outpace the limited availability of prime stock in the short term.

This growth will see occupancy costs in Paris CBD edge closer to those in Geneva, the most expensive office location in Continental Europe. Here, occupancy costs are forecast to reach US$19,220 per workstation by 2015. Budapest and Bucharest will also see above average growth in occupancy costs at 2.4% and 2.7% respectively per annum to 2015, but will remain the least expensive markets in Europe.

Occupiers in Geneva and Benelux are expected to benefit from the lowest increases in occupancy costs in Europe over the next five years, below 1% per annum, due to limited scope for rental growth.

‘We expect increasing occupancy costs across Europe to be driven by rising rents, but rental growth is underpinned by varying factors. The rebound in global production and consumer spending is driving rental growth in Eastern European office markets. In London’s West End and Paris CBD, recovering demand, combined with supply constraints following reduced...