by Brianna Crandall — August 31, 2012—”Beijing wins an impressive 5 out of 6 possible ‘gold medals’ and tops the table for performance among the leading 100 global city office markets,” according to new research from global commercial property and real estate services provider Cushman & Wakefield. With the world focused on the Olympic and Paralympic Games in London, the firm decided to take a “relatively informal” look at how global office markets have been performing, and to award “medals” for the markets showing the fastest value growth over the past year, the ones displaying the strongest rental or yield recovery since the last global downturn, and those that have sustained the highest rents and actual capital values for these criteria.
Highlights of Going for Gold in the Global Office Market include:
- San Francisco ranks second behind Beijing, with rental values buoyed by strong demand from its tech-driven economy. By contrast Moscow lies in third place, with commodity strength aiding its recovery.
- London takes fourth place on a par with Shanghai on the back of a strong upturn in rents and capital values as well as the focus of being host Olympic city.
- Asia was the top-performing region overall, winning more “medals” and more “golds” than the Americas in second place and the Europe/Middle East/Asia (EMEA) region in third.
- Overall, Europe lags behind due to a slower recovery compared to other global regions as the sovereign debt crisis weighs on business decision-making.
According to Glenn Rufrano, Global President and CEO, Cushman & Wakefield, “…it’s not as simple as saying the so-called ’emerging’ markets are seeing the growth and the ‘mature’ markets have the highest values. We are seeing a real mixing of demand and activity, which means we have a truly global market in which these old labels are being left behind.”
The Americas was the leading region for fastest value growth in the past year based on rent and yield adjustments. North America was ahead for yield compression, with U.S. and Canadian cities taking six out of the top ten spots. Latin America out-performed on rental growth however, with Sao Paulo, Bogota and Lima in the top 10 for rental growth alone.
Asia came out top for the highest rents and capital values sustained, with five out of the top 10 global markets. London and New York secured places high up on list while Paris, Zurich and Geneva round out the top ten. Despite Beijing taking the overall top spot for performance, it was beaten by Tokyo and Hong Kong as the most expensive by rent and by Taipei and Hong Kong as the most expensive by yield.
Asia again stands out as the stronger market when it comes to the recovery seen since the end of the great recession, with aggregate office rental values up over 15% since 2009, led by mainland China followed by Hong Kong, Indonesia and Singapore.
Europe has seen the weakest recovery, with only London and Moscow achieving “gold medals.” Certain Nordic markets have also recovered well, led by Oslo, while the leading German cities as well as Paris have seen yields correct even if rents are yet to stage a strong bounce. Cushman & Wakefield says that London may experience a lasting change after the Olympics as the east section of the city grows and develops, and other European markets can expect a steady buildup in demand and activity across the region’s established cities as well as the continued development of new competitors, led by Moscow, Warsaw and Istanbul.
According to David Hutchings, head of EMEA Research and author of the report, “Performance has slowed in general as uncertainty has increased in most areas of the global economy in recent months, but we still have an international office market where occupiers are needing to seek out better space and locations to help them compete, work better and meet their sustainability targets. With the cost of that space only likely to increase as supply levels fall, any pause in the market as decision making slows is an opportunity for winning businesses to take advantage and steal a march on their competitors -and that’s what we’re starting to see in some areas. As in sport, the most successful businesses are not always the fastest but they are likely to be the boldest and the best prepared!”
