Global Office Markets Show Stability in the Face of Headwinds
The global economy has seen recent headwinds from the smoldering eurozone debt crisis, slowing growth in China’s economy and the forecasted American fiscal cliff. Yet our overall global view of office real estate is moderately positive. While many large occupiers have taken a wait-and-see attitude toward the global economy, others are leasing up much-needed space to accommodate expanding operations. Quality office buildings in major global cities are seeing consistent demand from both occupiers and investors.
- U.S. is showing gradually lowering vacancy rates. Canada’s office market continues to perform well and is seeing notable development activity in major markets. Office absorption has been largely driven by Intellectual Capital, Energy and Education (ICEE) sectors.
- Mexico and Brazil report slightly higher vacancies, due to a combination of speculative construction and slackening economic growth. Yet São Paulo still boasts the ultra-low vacancy rate of 3.3%.
- Average Central Business District (CBD) office rents remained broadly unchanged across key EMEA markets, but this has been a result of limited supply more than increased demand. Business confidence across Europe is firmly negative, which does not bode well for the next year of activity.
- China’s slowing growth has dampened office demand in some Asian markets. Beijing’s office market remains healthy, but appeared lackluster when compared to an extremely active 2011.
Global 2013 Forecast
- Expect only modest improvement in North American office vacancy rates over the next two years, with the exception of a few strong ICEE markets.
- Central and Eastern Europe are feeling the effects of economic stagnation. Greater certainty in the eurozone is still some ways away, although a continued improvement in activity is expected by mid-2013.
- Rents in UK regional markets should remain stable due to the lack of Grade A space. Most markets will reach a ‘tipping point’ by mid-2013 at which time further rental growth is expected.
- The outlook for the Beijing office property market, especially in the Class A sector, should continue to be positive; with investment market in the office property sector to also remain strong.
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