According to Jones Lang LaSalle's third quarter 2012 Global Office Index released this week, reveals a stable outlook for global prime office rental growth in 2013 with the majority of major markets expected to register single-digit rental growth.
According to the Index, the markets with the strongest rental growth prospects include: Beijing, San Francisco, London, Tokyo, Moscow, Hong Kong and Sydney.
While the overall outlook shows rising rents next year, Jones Lang LaSalle's analysis of global rental growth in the third quarter 2012 show a deceleration in office rental growth to 0.2 percent, down from 0.6 percent growth in the second quarter of 2012. A third of the markets covered by the Index registered rental declines in the third quarter, compared with just a quarter of all markets in second quarter, reflecting a range of factors including weak corporate occupier demand particularly from the financial sector, oversupply or poor economic fundamentals.
"On an annualised basis, prime rents were up two percent, which while registering positive momentum that still represents the lowest year-on-year growth in two years," said Jeremy Kelly, Director in Jones Lang LaSalle's Global Research team. "Not all global markets are moving with synchronicity and there are a number of top performing markets to watch- Jakarta, Mexico City, Rio de Janeiro and Beijing- as the BRIC and MIST office hubs registered the fastest rental growth. Tech-rich markets such as San Francisco and Stockholm are also performing well."
As a companion analysis to the Global Office Index, Jones Lang LaSalle also issued a new Global Market Perspective, its quarterly piece that identifies the global economic forces on property markets worldwide. The fourth quarter issue points to a divergent leasing and investment market.
Key highlights from JLL's Global Market Perspective include:
Investment volumes: US$100 billion of capital transactions registered in Q3 - a consistent pattern emerges.
Capital Markets outlook: On track to achieve US$400 billion investment volumes for full-year 2012. US$100 billion per quarter to continue into 2013, with upside potential.
CMBS: CMBS activity in the United States is on track for post-recession high.
Office leasing subdued: Office leasing volumes weaken globally as corporate occupiers adopt a holding pattern and delay real estate decisions in the face of economic uncertainty. Global leasing volumes for full-year 2012 are expected to be 15 percent below 2011. Net absorption, a measure of expansion demand, is likely to be down 20 percent for full year 2012 vs. 2011.
Vacancy edges downwards: Global office vacancy rate continues to edge downwards, and currently stands at 13.2 percent - helped by very low levels of new office deliveries in the United States and Europe.
Construction: New office deliveries are at the lowest level for more than a decade. Construction is gradually increasing in the United States and Europe, but will still be below historic norms.
Capital values: Capital appreciation decelerates to an annualised rate of 4.2 percent (across 24 office markets).
Retail: International retailers boost demand in key gateway cities and across emerging markets.
Industrial: Pockets of strength in the United States; market polarisation in Europe; retail sales underpin demand in Asia.
Hotels: Full-year 2012 hotel investment volumes likely to be 10 percent below initial forecasts. Strong investor focus on gateway cities, notably New York and London.
Residential: United States rental apartment market remains robust, with burgeoning development pipeline; German residential market is attracting institutional investors.
Jones Lang LaSalle's Global Office Index tracks the rental performance of prime office space across 90 major markets in the Americas, Asia Pacific and Europe.