As the European economy edges nearer to full capacity, job growth will remain positive, but more modest than in recent years. The strongest growth will come from the knowledge-led sectors, including professional services, science and high-tech. The occupational story remains strong, thought European occupiers will be more cost-conscious as productivity moderates, and will therefore look to adopt new workplace strategies to boost output and control costs.

Flexible offices will continue to grow as ‘space-as-a-service’ becomes more mainstream across European markets and we expect to exceed 13% of total office demand in 2020. Those cities with higher-tech occupier bases should see the strongest increases in flex space demand as startups seeks space on a per-desk basis. Naturally, the more traditional lease will work more effectively for corporate occupiers who are planning their real estate decisions on longer time frames.

Supply and vacancy rates will remain low around the current average level of 5.6% into next year. We expect rental growth will begin to taper from the 4–6% pa levels we have witnessed in recent years to more sustainable levels of 1–2% in the next couple of years. Given this, lease re-gears will become an increasingly common theme throughout 2020.

New, speculative development will be more common across core cities as rental growth is outpaced by development cost growth, though we expect developer interest to favour the core European cities with the lowest vacancies including London and Berlin. Funding partners will be more attune to lending to at least part-pre-let schemes and on the basis that costs are locked in. Much of the new space will be delivered in asset management with rental uplift opportunities.

_{Read the articles within European Offices Outlook below.}