News South America Office property rental markets saw steep declines across the globe in 2009, report shows Office property rental markets saw steep declines across the globe in 2009, report shows |
| Tuesday, 02 March 2010 | |
 Global rental market declines
Weakness and recession hit office property markets in every corner of the world in 2009 with South America and the Middle East performing best, according to a new global report. While South America and the Middle East saw rental declines of just 5% the Asia Pacific region had a catastrophic year with declines of up to 53%, the report Office Space Across the World 2010 from Cushman & Wakefield shows. Rio de Janeiro, Seoul and Sydney were big success stories in their regions rising closer to the top ten with Seoul and Sydney both achieving rental growth of more than 10%. But at the other end of the spectrum Eastern European cities saw significant declines. Moscow fell three places in the top ten off the back of 33% rental declines and Kiev plummeted from 12th to 49th following a 52% rental value slump. Tokyo topped the list but still suffered rental decline and weak demand in 2009. The city’s central business district saw prime rents on grade A offices decline by 21% as large corporations adopted policies of cost saving and the renegotiation of existing leases. Across Japan rental levels declined sharply in the first half of the year but eased towards the end of 2009. Cost constraints continue to drive occupier demand, the report says, and landlord incentive packages have risen in line with occupiers looking for an increase in lease length. London’s West End, knocked from the top spot into third last year, has edged up a place as a result of shallower rental declines. Rents declined in the West End by 25% over 2009, and in the City of London by 16%, a result of the collapse of the financial markets. Both areas are likely to benefit from a dearth of supply going forward, and a sharp bounce back is expected, the report points out. Hong Kong, in third position, saw dramatic rental declines of 35% and the central business district was hit by tenants moving to cheaper submarkets such as Kowloon East. The increase in the level of sublease space, coupled with low tenant activity, has driven rents down. Dubai came in fourth due to a minor rental decline in the Internal Finance Centre of 6%. But the huge oversupply of office space in Dubai is likely to put downward pressure on rents over 2010. Mumbai in fifth position saw a severe decline in rents of 30% over the year, compared to an average drop across India of 20%. While in sixth place New York’s Midtown saw minimal rental decline over the year, falling by just 4%. A massive rental readjustment took place in Moscow’s central business district in 2009 and the city is set for further declines, the report says. Moscow’s CBD rents fell by 33%, most significantly in the first half of the year. Though rents stabilised in the second half of the year the market is still fundamentally weak with speculative schemes completing this year set against low occupier activity. In Paris rents fell by 10% as France suffered less severe declines than had been anticipated. Whilst demand dropped and supply increased across the country in 2009, improvements are expected in 2010. Milan suffered a steeper decline in rent than Rome, a drop of 9% compared with 6%, largely as a result of public sector demand in the Italian capital. Though the market is likely to suffer further declines over 2010, it is expected that there will be increased stability, brought from a rise in occupier demand, towards the end of the year. Switzerland saw a minimal 3% rental decline over 2009. Zurich, with its concentration of financial companies, saw a 6% decline and is rental values are expected to remain flat over 2010.
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