Los Angeles — May 19, 2010 — Increased demand, together with more relocation activity, is slowing rental declines in the majority of global office markets, with growth beginning to accelerate in three major markets, according to the latest Global Office Rental Cycle report from CB Richard Ellis Group, Inc. (CBRE). Overall, a tentative recovery of property markets is emerging, reflecting the improved economic activity globally.
London’s West-End and Hong Kong joined London City in the first quarter of 2010 as the first markets to begin to see rents recover, with rents leveling off in Sydney and Shanghai. A slowing of rental decline was also seen in Washington, DC and Mexico City, among others.
“Cities in all regions, including Washington D.C., Singapore and Paris, moved forward in the rental cycle in the first quarter following improvements in demand,” said Raymond Torto, CBRE’s Global Chief Economist. “Relocations continue to be the main driver of activity, but there are also signs of expansion activity in a few markets, including Paris and Sydney.”
With the global economy expected to grow by around 4.5% in 20101, the latest research from CBRE shows that economic recovery, characterized by stronger growth in emerging markets such as India and China rather than in developed markets such as the US, UK and Japan, is reflected in property markets around the world.
The new Global Office Rental Cycle report indicates that rents are at the bottom of the cycle – or beginning to grow – in many emerging Asian markets such as Mumbai, New Delhi and Beijing, as well as most Latin American cities covered in the report. In Shanghai, for example, office rents registered a quarter-on-quarter growth of 1.2%, the first positive move since Q4 2008, and net absorption was positive driven by demand across all sectors.
“We have witnessed rental growth in a few advanced economies, represented by key global markets like London and Hong Kong,” said Nick Axford, CBRE’s Head of EMEA Research. “London continues to lead the recovery with sustained rental growth in the City market and we are now at a pivotal point in the cycle for London’s West End where tenant incentives are beginning to dry up.”
With prospects for the global economy still uncertain, considerable risks remain in relation to lending and liquidity, government debt and levels of policy support. Despite economic reports indicating an optimistic outlook, CBRE cautions that it is not until sustained employment growth returns and demand for office space gains significant momentum that markets globally will begin to rebound significantly.
“The recovery is also highly dependent on supply at a local level,” said Dr. Torto. “In many cases the supply of grade A space is falling in the Central Business Districts as occupiers relocate to higher grade space and leave older space vacant elsewhere in the city, putting upward pressure on prime rents earlier than the rest of the market. It may take significantly longer for rents across all submarkets to recover following initial improvements in the key financial districts.”
According to the IMF with GDP growth of around 4.5%
About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 29,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 “best in class” company for three years in a row. Please visit our Web site at www.cbre.com.