Market AnalysisDemand for office space across Europe has been boosted by employment growth and falling vacancy rates, resulting in an 8.9 per cent growth in prime office rentals in the year to the end of March, according to Jones Lang LaSalle's latest European office property clock.

Prime rental rates were flat in Dublin during the quarter but rose by 26.3 per cent over the year to the end of March last, making it the second best performer (after Madrid) over the 12 months.

The report shows Dublin prime rents - at €646 per sq m (€60 per sq ft) per annum - were the fifth highest in Europe after London's West End (€1,546 per sq m/€143.6 per sq ft), Moscow (€974 per sq m/€90.5 per sq ft), London City (€952 per sq m/€88.5 per sq ft) and Paris (€760 per sq m/€70.6 per sq ft).

The European office property clock shows major office markets in their rental cycles at the end of the first quarter of 2007. The European office index increased by 2.5 per cent over the quarter and total European take-up reached 3.2 million sq m (34.44 million sq ft) in Q1, up 6 per cent on Q1 2006. Rents increased in 13 of the 24 index cities and were stable in all the others.

Paris registered the highest activity, with a take-up of 645,000sq m (6.94 million sq ft), although this is 16 per cent below the very high level achieved in Q1 2006. Moscow saw an outstanding quarter with 541,000sq m (5.82 million sq ft) taken up, 136 per cent more than in Q1 last year.

Alastair Hughes of Jones Lang LaSalle said: "Limited supply - coupled with ongoing steady demand driven by strong economic growth in many markets - is causing vacancy rates to drop further across Europe. Eighteen of the 24 index cities now have single digit vacancy rates and we expect to see these declining further throughout the next quarters."

In Q1 2007 the EU economy continued its strong performance of last year. A key driver has been stronger performance in Germany, where annualised GDP growth for 2007 was adjusted upwards from 1.5 per cent in January to 2.1 per cent in April. As a result, the annualised forecast for the EU was also revised upwards from 2.3 per cent in January to 2.6 per cent in April.