by Brianna Crandall — April 1, 2011—Corporate confidence is boosting activity in top tier office markets around the world, leading to accelerating early cycle rental growth and robust capital value growth in prime assets, especially where new quality supply is limited, according to Jones Lang LaSalle’s inaugural, quarterly Global Office Outlook report.
The new report series tracks and forecasts how global economic conditions impact property leasing, capital markets and occupier conditions throughout Asia Pacific, Europe, Middle East and Africa (EMEA) and the Americas. The report points to several hot spots emerging with high growth prospects including the E7 (Brazil, India, China, Russia, Indonesia, Mexico and Turkey), Hong Kong, Singapore and Poland.
For the first time since the global financial crisis, downside risks are being outweighed by the improving business optimism, although recent global events have the capacity to dent this optimism, says the report. It shows that market demand and leasing activity are back in a cyclical upswing, fueled by improving economic growth, renewed corporate confidence, and strengthened balance sheets and prospects of increasing spending and hiring associated with real estate investment. Global office vacancy rates reportedly reached a plateau and edged downward across all three regions in late 2010. The global office vacancy rate now stands at 14.1 percent.
Prior to the devastating Japan earthquake and tsunami, Asia Pacific was moving ahead strongly with the largest declines in vacancy, improving occupancy levels, and attractive conditions for investment. Jane Murray, Asia Pacific Head of Research, added, “Regional momentum should continue, led by robust growth in China and India. The ultimate impact on the large Japanese economy and real estate market and its trading partners regionally and globally will not be known for some time.”
As for the Americas: “The coming year will be best characterized by an uneven upswing and cautious optimism,” said Ben Breslau, Managing Director of Jones Lang LaSalle Americas Research. “North America is expected to accelerate modestly, with continuing improvement in select prime markets such as Washington DC, Midtown Manhattan, and San Francisco. United States vacancy levels are down year-over-year and will close below 18 percent in 2011. Additionally, the Canadian office market will tighten, with accelerated rent growth in 2011, while Sao Paulo’s strong economic growth is translating into healthy office demand.”
Corporate occupiers are expected to be actively focused in 2011 on additional market moves that accommodate anticipated increases in hiring, the need to access new workers amid a renewing “war for talent,” and the necessity to make workspace more productive.
