NEW YORK CITY-Just skip next year and plan on ownership or investment in 2013, according to most reports, and Cushman & Wakefield’s Global Office Forecast is no different. The continued uncertainty in Europe and the weak US fundamentals has projected flat office growth throughout the two continents, with Asia and South America the only bright spots next year.
Office rent stagnation is well known in the United States (except for high-tech and energy markets, such as San Francisco), and is expected to be the trend for Europe as well, Maria Sicola, executive managing director and head of Americas research for Cushman, tells GlobeSt.com. However, whereas rent growth is predicted to return in 2013 with better fundamentals in the United States, that’s not the case in Europe, she says. “The markets there are going to take longer to recover,” Sicola says. “I don’t see rent growth there even into 2013.”
The only positive is that both the United States and European markets are seeing steady demand and very little new development, which will eventually create a space crunch when companies are looking to jump into better locations. However, there’s also changes in corporate use space, with technology and intensified study of use needs creating less absorption. Only 6% of Cushman’s top clients said they planned on significantly increasing office portfolios during 2012.
Asia continues its strength as the market with the most demand, and even a projected GDP drop from 9% to 6% in the next year is still three times higher than the US’ projected 2% GDP growth. Asia’s construction pipeline is the highest globally, at more than 250 million square feet. However, large markets like Guangzhou and Chengdu, China; Mumbai; Ho Chi Minh City and Seoul have class A vacancies in double digits. Sicola says the biggest mover, China, is seeing more growth activity in secondary cities, and these smaller metro areas still dwarf the largest US cities.
Canada and South America, mostly Brazil, are also seeing strong growth. Brazil has improved demand for new office, with absorption patterns expected to be 11% higher this year from 2010, and increases of 11% in 2012 and 10% in 2013, Sicola says. Canada has been widely insulated from the US downturn that started in the second half, she says, with energy-strong markets such as Calgary seeing very positive demand from corporate users.
Basically, the key to success in 2012 seems to be those markets that have little supply and tenants who are in the technology or energy fields. Besides these areas, 2012 will be forgettable.
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