EUROPEAN AND ASIAN OFFICE MARKET RENTS STABILISING
Rental growth in London office market leads global recovery
London / New York, 24 February 2010 – The effects of the economic crisis on demand for office space varied across the world’s major office markets in 2009, and there are now widespread differences in their rental characteristics, according to CB Richard Ellis’ (CBRE) new Global Office Rental Cycle report. Almost all real estate markets in Europe and Asia are now seeing rents falling at a slower rate and in some cases stabilising, a trend which is expected to continue as take-up improves and vacancy moderates in 2010. In contrast, most US office markets, with the exception of New York, are further back in the rental cycle and are likely to see further falls in rents.
Please see PDF of full report attached below for chart ref:
CBRE Global Rental Cycle, Q4 2009.
The global economic outlook for 2010 is more optimistic than last year and the world economy is expected to return to growth, according to CBRE’s report. This projected aggregate growth masks a varied pattern of recovery: the strongest growth is expected in Asia Pacific and the weakest in Europe. Despite this, London remains at the forefront of recovery in global office rents. The City of London surpassed expectations for the 2009 year-end by registering prime rents at £43.50 / sq ft / annum and rental growth of 3.5% in Q4 2009, defying forecasts that rents would remain stable.
Ray Torto, Global Chief Economist, CBRE, said: “In Hong Kong and the West End of London, prime rents are thought to have reached the bottom of the cycle at the end of 2009 and are expected to remain stable or start to grow over the next few quarters. Elsewhere across Europe and Asia, some markets continue to see rental falls, for example Paris and Singapore where rents fell by 4% and 10% respectively in the quarter. However, we expect a general slowdown in rental declines as both occupier demand and vacancy rates start to show signs of stabilisation or even some improvement through 2010.”
Major North American markets continue to lag behind European and Asian counterparts, with CBRE expecting significant rental falls in many cities in 2010 in the face of modest demand. Most notably, Toronto – where rents have fallen by 16% since June – is expected to see a decline in rents over the coming year, driven by increasing amounts of vacant space as tenants relocate to newer buildings.
“The gap is widening between global office markets as local supply and demand factors are influencing the strength and shape of recovery. Positive economic signs will emerge in 2010 and lead to improved occupier stability. However, overall global prospects remain patchy at present. Demand for office space continues to lag the wider economy and many markets are likely to see further falls in employment before recovery firmly takes hold,” concluded Torto.
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For more commentary on global and regional trends, view the latest CB Richard Ellis’ research at: www.cbre.com
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