HONG KONG—Continued uncertainty in Europe and weak US fundamentals have projected flat office growth throughout the two continents, with Asia and South America the only bright spots in 2012.
Office rent stagnation will be the trend for Europe, says Maria Sicola, executive managing director and head of Americas research for Cushman & Wakefield in San Francisco. Whereas rent growth is predicted to return to the US in 2013, that's not the case in Europe, she says. "The markets there are going to take longer to recover," Sicola says.
The clear global office market winner is the Asia Pacific, in large part because China's fundamentals have led the region, according to a recent 2012 CBRE Market Outlook. In fact, the one worry for these markets is the too-large construction pipeline, a concern not even on the radar in Europe or the US.
It's clear that both corporate users and investment will continue to flow eastward, said Nick Axford, Hong Kong-based head of Asia Pacific research for CBRE, in a recent podcast discussion. "While the global uncertainty has created an unfavorable environment across the world, it's a very different picture in the Pacific," he said, predicting "healthy levels of growth" for most of the local economies.
Still, office supply issues are affecting Seoul, Singapore, parts of India and the secondary markets of China, as developments now under construction and through the next few years will put a strain on vacancy and rent. In Beijing, Sydney and Bangalore, however, conditions will likely stay tight for the next few years.
One factor affecting the entire world office market is how corporations are rethinking use strategies. Basically, there will be fewer employees using office space, based on technology improvements and forced consolidations creating slower worldwide absorption. In a recent Global Office Forecast, only 6% of C&W's top clients said they planned on significantly increasing office portfolios during 2012. And according to research from Colliers International, due to the declining workforce population, Europe is set to see a possible 10% reduction in demand for office and industrial space over the next 20 years, and another 10% drop over the subsequent 20 years (to 2050).
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