Utrecht office market threatened by shortage in supply
Continued demand for office space in Utrecht is likely to cause a shortage in supply and sharp increases in rents. This is CBRE's conclusion based on the latest figures on the Utrecht office market. The first quarter of 2019 saw the highest level of lets since 2013, at 43,400 sq. m.1 Although CBRE again predicts strong demand in 2019, a shortage of suitable supply is likely to prevent a new record.
Lowest vacancy levels since crisis
The letting of office space in Utrecht has been breaking records for several years in a row. The strong first quarter of 2019 follows an outstanding 2018.2 The records in the number of lets agreed have resulted in the lowest levels of vacancy in the city since the financial crisis (8.2%). In the Central Business District (CBD) around central station, the vacancy percentage has been around 1.5% for some time now.
The strong demand and falling vacancy levels have caused a 12%3 increase in high-end rental prices in the Utrecht CBD, now reaching EUR 285 per sq. m.
“It is only a matter of time before rents in Utrecht pass the notional barrier of EUR 300 per square metre. We are also expecting strong growth in lets outside the CBD. Papendorp in particular is showing sharp increases. Asking rents have increased by 20% since the lowest point, now reaching EUR 185 per sq. m. That was the level rents were achieving before the crisis.”
Demand exceeds supply
The high absorption of office space is a result of the new-build developments that have entered the market, including WTC Utrecht. These offices are quickly pre-let (before completion). In order to continue to provide accommodation for businesses in Utrecht, CBRE considers the development of sufficient new offices to be essential.
“As things currently stand, it will be 2022 before any new developments come onto the market. This means that there are likely to be shortages in Utrecht in 2020 and 2021. However, there will be more opportunities for new development if the City Council relaxes the pre-let requirement for certain areas, as is now being considered. That opens up possibilities for the further development of the city and to continue to facilitate space for businesses in the future."
Strong demand from outside Utrecht
The demand for office space is coming from companies both in Utrecht and in the rest of the Netherlands. In 2017 and 2018, a large proportion of properties were let by businesses from outside the city, 49% and 79% respectively. The new developments in the Central Business District (CBD) around the central station are proving particularly attractive to businesses from the rest of the Netherlands.
Tech & Media the largest sector
In recent years, the Tech & Media sector has developed to become the largest sector in Utrecht. In the first quarter of this year, these companies accounted for the largest proportion of square metres (18.3%), followed by commercial services (15.4%).
1 Based on Q1
2 In 2018, 148,000 sq. m. of office accommodation was let
3 Q1 2019 – Q1 2018
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.