Dubai has seen current demand increase in the third quarter of 2011 with existing companies either looking to expand their activities, or from occupiers located in older areas of the city seeking more central areas, the report shows. The Dubai International Financial Centre and ‘TECOM’ freezones were particularly in demand this quarter, resulting in a sharp reduction in local vacancy rates.
In Abu Dhabi many occupiers are considering deferring relocation decisions until 2012, when a considerable amount of new supply will become available to the market. This is also due to the rising vacancy rate keeping rents competitive, albeit the rate of rental decline seems to have slowed recently.
Take up in the European market office in London and Paris soared by 26% and 46% respectively in the quarter as office leasing transaction levels hit a 2011 peak. Despite the weakening economic outlook, occupier demand across European office markets remained roughly stable compared to the same period last year.
During the third quarter lettings across all of London’s submarkets increased on the previous quarter, with take up totalling 256,000 square meters. Similarly Paris has also experienced an upturn in leasing activity with lettings totalling 788,000 square meters from July to the end of September, which represents a quarter on quarter increase of 46%. Quarterly office take up in Paris has been prominently driven by a small number of large deals.
Despite the escalating Eurozone crisis, prime rents across the region remained static in the third quarter with the CBRE EU-27 Office Rent Index edging up 0.1%. One notable exception is Moscow where prime rents rose significantly in the past three months, up 9.5%, marking the fourth consecutive quarter of office rental increase and reflecting the strong rental recovery over the past year of 31%.
‘The European sovereign debt crisis has resulted in a more cautious sentiment among occupiers and it is hardly surprising that some have opted to delay major real estate decisions until the economic outlook improves. However, it is encouraging that against this economic backdrop we are seeing an upswing in leasing activity in London and Paris. It suggests that the flight to quality trend continues and corporates are exploiting static rents to upgrade to better space,’ said Matthew Pullen, head of global corporate services at CBRE for Europe, the Middle East and Africa.
The outlook in Europe contrasts with the continuing rental recovery in the Asia Pacific region where prime rents have risen 2.2% in the past three months, contributing to a 12.9% upturn in the past year compared to 1.8% in Europe.
Earlier this year, CBRE’s Business Footprints report identified Hong Kong and Singapore as the world’s most popular business locations, and these two centres have been key drivers of the rental recovery across the region.
