Office markets around the world are starting to experience more stability for the first time since the global economic downtown.
According to Colliers International’s Global Office Midyear 2013 Report, some office markets continue to lag but, overall, global markets are steadying and are aiming for a state of economic equilibrium between supply and demand.
“Office markets around the world have survived the challenge of a slowing Chinese economy, a mixed American recovery and a European market that is still finding its economic footing,” says Colliers’ director of research, James Cook.
Experts at Colliers point to six key trends in 2013 that underscore the search for equilibrium.
1. The U.S. and Canada
Strength in the ICEE (intellectual capital, energy and education) markets will remain the primary driver of office-using employment growth through this year. For the fifth consecutive quarter, the vacancy rate has dropped, sitting around 14 per cent in the first quarter of 2013. Meanwhile, a strong rebound in the housing market should benefit U.S. suburban office markets in 2013, as a variety of service providers open offices and resume hiring to cater to new developments.
2. Mexico
Office development is strong in Mexico City, with 20 new buildings developed in 2012, 54 more under construction in the first quarter of 2013, and a 17 per cent increase in absorption. In the next five years, Mexico City’s office inventory is expected to increase by approximately 3.2 million square feet but with a stable vacancy rate, the market should have enough absorption to fill the new properties.
3. China
While demand for Class A space in Beijing decreased in the second half of 2012, and absorption also decreased significantly, overall rental rates still grew by nearly 20 per cent. Demand is expected to remain largely stable for the remainder of 2013.
4. Australia
Domestic investment has doubled in Sydney and Melbourne since 2011, now at 78 per cent. It is expected to remain strong. The leasing market remains slow in both cities, despite tightening vacancy rates, positive absorption and rental growth. In Melbourne, a lack of business confidence has led to a slowdown in demand and tenant commitment. However, it is expected that certainty will return to the market and drive demand in 2014.
5. Europe
While the threat of a Eurozone break-up has diminished, the European office market continues to operate at a slow pace. There have been pockets of rental growth in parts of Northern Europe such as Germany. Across most of Southern Europe and in some fringe Central and Eastern markets, there continues to be rental weakness. In Germany, occupier demand began rising in the first quarter of 2013, while demand in Paris is expected to stabilize this year.
6. India
Office absorption in Mumbai rose through 2012, despite occupier caution, with demand driven by the banking, financial services, insurance and IT industries. Healthy demand is expected to continue in 2013, with the Andheri, BKC and Lower Parel sub-markets the preferred destination due to availability of Class A space.
