Prime office rents in Western Europe grew by an average of more than 17 per cent in the year to September, the fastest rate for nearly a decade, according to research by Jones Lang LaSalle. Dublin rents were up 33 per cent on 1999, the same annual increase seen in London. The cities with the strongest growth in prime rents in the third quarter of this year were Stockholm, London and Barcelona. Office rents in Dublin remained stable during the quarter - and were in the top three on a year-on-year basis.

However, rents in London rose 14.3 per cent over the quarter, the second highest increase seen in Europe after Stockholm, where rents were up almost 16 per cent in the quarter and by 48.6 per cent for the year.

In relation to Dublin, the report said: "With very low vacancy, further upward pressure on rents is expected, as a result of strong demand, particularly from `new economy' sectors."

The report also anticipated further rises in London rents in the short term. "The vacancy rate has dropped to 3.3 per cent with virtually no new space vacant at the end of Q3. Take-up has been very strong so far in 2000 and has surpassed the total for 1999," it said.

Overall, the report found that prime office rents throughout Western Europe were set for record levels this year because of strong demand and limited supply. Supplies are beginning to respond to shortages and rent increases, but around 50 per cent of the new office space due next year is already pre-let.

The report found that rental growth in the retail sector was now slowing in most European markets. While consumer confidence was at its highest level for a decade, the retail sector was becoming increasingly competitive and pressure on margins was curtailing retailers' ability to continue to pay top rents.

"Overall annual prime rental growth has slowed from its maximum rate of 19 per cent in Q1 2000 to 18 per cent in Q2 and then to 13 per cent this quarter," the report found.

"The strongest annual rental growth continues to be associated with countries with the strongest consumption growth and these retail markets have seen several years of sustained growth (e.g. Ireland, Spain, Sweden and France).

"Markets where a revival in consumer activity has lagged behind the rest of Europe, notably Germany and Italy, are starting to show signs of growth."

Prime unit shop rents were stable in Ireland during the third quarter but the annual growth rate was 27.9 per cent. Demand remained high and supply tight, the report said.

In the UK, there was no change in prime rents in the third quarter with growth rates slowing in most centres. However, demand continued to outstrip supply in central London although there were fewer retailers competing for space compared with two years ago.