Asia Pacific office markets saw the highest rental growth of 2.5%, according to the inaugural Jones Lang LaSalle Global Office Index published today (Thursday 10 November).
The Americas followed with an increase of 1.1%. However, economic concerns in Europe have weighed down on markets and growth has come to a virtual halt in that region, from 2.1% in the second quarter of 0% in the third.
The firm’s new Index shows this was the seventh consecutive quarter that prime rents have risen globally, reflecting an 8.2% uplift since the bottom of the market in fourth quarter 2009 and a 5.5% increase year on year.
Office rents rose further in most markets in Asia Pacific in quarter three, although at a slower rate than previous quarters. Of the 27 featured office markets, 18 saw advances in net effective rents. In the rest rents either stabilised or recorded small residual declines.
Aggregate rental growth was largely similar to the previous quarter, with an average quarter on quarter increase across the region of 2.5% as stronger growth in some Australian cities helped offset weaker behaviour in Asia. In the second quarter rental uplift averaged 2.4%.
Seven out of ten cities in the Global Office Index for quarter three were in Asia Pacific, two were in South America and one the United States.
‘The picture across Asia Pacific is diverse, reflecting varying conditions within markets in terms of occupier demand, available stock, landlord expectations and local economic drivers,’ said Jane Murray, head of research, Asia Pacific at Jones Lang LaSalle.
‘We expect rents to increase in most markets over the short term, although Hong Kong and Singapore may witness some softening given their greater exposure to global economic conditions, while a few other laggards are also likely to see either no growth or some residual rental declines. Rental growth of up to 25% is predicted across the region for 2012, with the strongest uplifts likely to be seen in markets such as Beijing and Jakarta,’ she added.
The report also shows that real estate markets are diverging, with emerging markets in the BRIC economies demonstrating strong year on year performance, with increases in Beijing, up 50.6%, Moscow up 41.2%, Shanghai up 23.7% and Sao Paulo up 20.4%. Other Asia Pacific markets that registered positive growth included Jakarta up 48%, Hong Kong up 20.6% and Manila up 20.9%.
The ongoing strength of the global technology sector meant that other places had positive rental performance with Silicon Valley seeing an increase of 60%, Bangalore up 19.7% and San Francisco up 17.1%. Demand from the commodities sector supported 26.9% year on year growth in Perth, Australia.
Looking ahead to 2012, Jeremy Kelly, director in Jones Lang LaSalle’s global research team and author of the firm’s Global Market Perspective believes positive rental growth in major prime office markets will continue.
‘Most major markets are expected to see at least single digit growth, with some markets such as Beijing, Tokyo, San Francisco and Toronto having the potential to outperform in 2012,’ he said.
‘Despite signs of a deceleration in office leasing activity across the major international business hubs, the average global office vacancy rate of 13.8% is now the lowest in two years. The prime leasing markets in advanced economies are fairly tight and the supply pipeline remains very low. In this context, we believe that markets are well placed to resume their growth pattern once a degree of confidence resumes,’ he added.
