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SCMP Reporter

THE Jones Lang Wootton (JLW) European Property Index is a barometer of prime office property performance in 14 major markets in eight Western European countries.

   The two component indices track changes in capital and rental values in prime office property from 1980 to September 1993, based on local currencies, and are not adjusted for inflation.

   The indices are updated quarterly and weighted by their office stock.

  The rental indices are based on the JLW prime rental series for each city, while the capital indices are based on the JLW prime rents and yields series.

   Both indices indicate changes in values at the top end of the market and do not allow for depreciation.

    The third quarter of 1993 witnessed a further decline in European prime office rents and capital values.

   The JLW European Rental and Capital Values Indices both fell by seven per cent, one of the largest quarterly declines of the downturn.

    Since its peak in March 1991, the European Rental Index has decreased by 23 per cent, reflecting the rising vacancies and weak occupier demand in almost every major office market covered by the Index.

   Further declines are likely in a number of markets during the remainder of 1993 and into 1994.

    The European Capital Values Index declined by 18 per cent during the last year, and by 34 per cent since it peaked in March 1991.

   European capital values are now at their lowest level in real terms since 1986.

  While falling values are generally unwelcome, they are providing investors and owner occupiers with opportunities to purchase at low prices, and there are signs of renewed investment activity in a number of markets.

  The largest rental and capital value drops are in the major Spanish and German markets, while London - the first market affected by the downturn - may have reached bottom.

  The Brussels office market has been relatively immune to the European property-value doldrums, but its market has seen some downward adjustments in rental values during the last quarter, reflecting modest vacancy increases.

  The Paris office market remains depressed, with further drops in rental and capital values during the third quarter of 1993.

   The Paris Rental and Capital Value Indices have fallen by 29 per cent and 49 per cent respectively, since their 1990 peak.

   Farther south, in Lyon, the office indices have been relatively stable for the last year.

  The recession in Germany continues to lower office values. The German Rental Index has fallen by 19 per cent during the last year and the Capital Value Index is down by 22 per cent.

   Of the five German cities covered by the index, Berlin and Dusseldorf have recorded the sharpest fall in values during the last quarter.

   Munich has seen a modest decrease, while Frankfurt and Hamburg have been stable for the last two quarters.

  Weak occupier and investor demand has translated into further slides in the Milan Rental and Capital Value Indices during the last quarter. Milan office rents have fallen by 23 per cent in the last year, and are below their 1983 level in real terms.

  The Amsterdam/Randstad Rental and Capital Values Indices continue to be relatively stable, with only a six per cent fall in rental values for the last year.

  Rental and capital values in the two major Spanish markets plunged during the last year, with the Spanish Rental Index dropping 46 per cent since its peak in 1990, and the Capital Value Index sliding 61 per cent since its 1990 high.

   However, there is evidence that the rate of decline is slowing, particularly in Madrid.

  The London market is the only major office centre in western Europe which appears to have reached a turning point. The London Rental Value Index has been stable for two successive quarters.

   Increasing investment activity has translated into firmer yields and a modest increase in the Capital Value Index during the last quarter, representing the first quarterly rise in values since 1988.

 Information supplied by Jones Lang Wootton.



Euro office values generally depressed