JLL Office Property Clock Q2 2022
Strong Q2 European leasing activity recorded despite market uncertainties
- Alex Colpaert
- Atalanti Angelopoulou
- Tom Carroll
- Michael Scott
Conditions in the European economy in the second quarter softened. As a result of global supply chain disruption arising from China’s zero-covid strategy, the war in Ukraine and escalating sanctions regime, and the residual impact of pandemic-related bounce-back, commodity and energy prices increased and were more volatile. Gas, coal and electricity prices recorded record highs, affecting industry and consumer even as home heating demand eased as the weather warmed. Meanwhile oil prices climbed on US, EU and UK intentions to ban or phase out Russian oil. Rising energy and food prices were the primary driver of domestic price pressures across the region, though second order effects from higher transportation costs and availability shortfalls saw price rises spread more widely. Tight labour markets, a positive overall, contributed to wage increases, helping to spread inflationary pressure further afield. Exceeding the pace of wage growth though, inflation eroded real household incomes and spending power, and caused confidence to plunge to levels equivalent to those seen in the depths of the first lockdown. Forecasts for GDP growth rates this year have been revised down incrementally as headwinds have strengthened. However, they remain above trend rates of expansion due to residual benefit of loose fiscal, monetary and regulatory loosening during the pandemic.