prime office rents are expected to rise in the majority of Tier-One cities around the world in 2013.
According to Jones Lang LaSalle's third quarter 2012 Global Office Index, which was released this week, global prime office rental growth is expected to remain steady in 2013, with the majority of major markets expecting single-digit rental growth. villas in Doha
Beijing, San Francisco, London, Tokyo, Moscow, Hong Kong, and Sydney are among the markets with the best rental growth prospects, according to the Index.
Although rents are expected to rise next year, Jones Lang LaSalle's study of global rental growth in the third quarter of 2012 shows a slowdown in office rental growth to 0.2 percent, down from 0.6 percent in the second quarter. In the third quarter, a third of the markets covered by the Index saw rental declines, compared to just a quarter in the second quarter, reflecting a variety of factors such as weak corporate occupier demand, especially from the financial sector, oversupply, and weak economic fundamentals.
"Prime rents increased by 2% on an annualized basis, which while optimistic, reflects the lowest year-over-year growth in two years," said Jeremy Kelly, Director in Jones Lang LaSalle's Global Research team. "Not all global markets are moving in lockstep, and there are a few standouts to keep an eye on, including Jakarta, Mexico City, Rio de Janeiro, and Beijing, which are the BRIC and MIST office hubs with the fastest rental development. Markets with a high concentration of technology, such as San Francisco and Stockholm, are also doing well."
Jones Lang LaSalle also released a new Global Market Perspective, a quarterly piece that describes the global economic influences on property markets around the world, as a companion to the Global Office Index. The fourth quarter problem reveals a leasing and investment industry that is divergent.
The following are some of the highlights from JLL's Global Market Perspective:
Investment volumes: In Q3, US$100 billion in capital transactions were reported, indicating a consistent trend.
Capital Markets Outlook: For the full year of 2012, we are on track to reach investment volumes of US$400 billion. The US$100 billion per quarter trend will continue into 2013, with room for growth.
CMBS: In the United States, CMBS operation is on track to reach a post-recession peak.
Corporate occupiers adopt a holding pattern and postpone real estate decisions in the face of economic uncertainty, resulting in lower office leasing levels globally. Global leasing volumes are forecast to be 15% lower in 2012 than in 2011. Net absorption, an indicator of expansion demand, is expected to be 20% lower in 2012 than in 2011.
Vacancy continues to decline: The global office vacancy rate has decreased to 13.2 percent, aided by very low levels of new office deliveries in the United States and Europe.
Construction: New office deliveries have been at an all-time low for over a decade. In the United States and Europe, construction is steadily rising, but it will remain below historic levels.
Capital values: Capital growth slows to a 4.2 percent annualized rate (across 24 office markets).
Retail: Demand in main gateway cities and developing markets is boosted by international retailers.
Industrial: In the United States, pockets of strength exist; in Europe, consumer polarization exists; and in Asia, retail sales underpin demand.
Hotels: Hotel investment volumes for the full year 2012 are expected to be 10% lower than initial estimates. Gateway cities, such as New York and London, are receiving a lot of investor attention.
Residential: The rental apartment market in the United States remains strong, with a growing development pipeline; the residential market in Germany is attracting institutional investors.
The Global Office Index from Jones Lang LaSalle measures the rental efficiency of prime office space in 90 major markets across the Americas, Asia Pacific, and Europe.