Despite forecasting lower average rents across European office markets than for Asia Pacific and the US, DTZ Research believes that West End offices will post the highest increase in rents over the next five years.
Despite this exception, it still leaves occupiers with numerous attractive markets across Europe.
In its first ever Global Office Review report covering the first half of 2013, DTZ Research provides the latest outlook for 90 office markets across Europe, Asia Pacific and the US. The overall global picture shows most corporate occupiers waiting for a solid confirmation of sustained economic recovery before committing to new office space.
However, the London City market is already showing signs of improvement. In fact, take-up of new offices increased 16 per cent in H1 2013 compared to the same period last year. Elsewhere in Europe, cost cutting remains a priority amongst most occupiers and expansion plans are still left on hold.
In the first half of 2013, Europe saw mixed rental performances with an equal number of markets showing increases and declines. Increases in Moscow, Germany and the Nordic markets were due to solid demand and constrained supply. In contrast, declines were registered in Bucharest, Rome, Warsaw, Geneva and Glasgow. These were the biggest declines for individual markets globally.
In Asia Pacific, general sentiment and demand for office space has cooled as a result of the slow-down in Chinese growth. This resulted in rental declines in H1 2013 in several mainland China markets. However, demand held up relatively well in emerging South East Asia, particularly in Jakarta, where rents increased by nine per cent over the period.
In the US, limited rental growth was recorded despite the fact that more than half of US markets registered lower absorption levels in H1 2013, compared to the same period last year. The low absorption levels were attributed to a slow-down in tech demand. Absorption was further held back by occupiers increasingly seeking open work environments increasing efficiency. However, limited supply offset both these factors.
Milena Kuljanin, report author, says: “The global picture for the first half of this year is showing that most global corporations are waiting to see whether the global economic recovery will provide a sustained demand for their goods and service before they commit to expanding their office space. London is a bit ahead of this global trend with take-up figures up particularly in the second quarter of 2013.”
Magali Marton, head of CEMEA research at DTZ, says: “Elsewhere in Europe, Madrid saw the biggest percentage increase in take-up in H1, registering an increase of 70 per cent from the same period last year. This activity was driven by a few exceptionally large deals in the first quarter. Over the next five years, we forecasts rents across European office markets to be lowest among the three global regions, albeit with a wide range amongst markets. Despite the strong growth expected for the West End market, it still leaves occupiers with numerous attractively price markets across Europe. ”
Hans Vrensen, global head of research at DTZ, says: “Demand in Asia Pacific has recently cooled. However, over the next five year period, we project continued strong rental uplift across the Asia Pacific region. This growth will be strong also in India, but as these markets start from a low base they will continue to offer attractive costs to occupiers. Across the US markets, we forecasts rental growth in a much tighter range than in the Asia Pacific and European regions.”