Colliers International releases Global Office Real Estate Review

Office markets around the world have picked up the pace, with many now showing that the worse of the global economic downturn has passed, according to new research undertaken by Colliers International.

The bi-annual Colliers International Global Office Real Estate Review showed occupancy costs in the six months between mid to end 2010 leapt in Hong Kong from US$1738/sq m in June 2010 to US$2,066/sq m in December 2010 to remain the most expensive city in the world to lease office space, followed by London - West End in the same period to US$1,432/sq m, Tokyo to $1130/sq m, Paris to US$1,100/sq m and London - City, rounding out the top five, to US$1,074/sq m.

The data showed occupancy costs in Perth CBD, Brisbane CBD and Sydney CBD ranked 12th, 14th and 16th respectively in the global top 20 (see table below).

Nerida Conisbee, Colliers International National Director of Research, said tenants are back in the market with a renewed appetite for office space. Vacancy around the world is now tightest in Regina (Canada) at just 1.3 per cent, followed by Rio de Janeiro at 1.6 per cent, Geneva at 2.5 per cent, Sao Paulo at 2.6 per cent and Hong Kong at 3.1 per cent.

At the other end of the spectrum, vacancy is highest in Riyadh (Saudi Arabia) at a staggering 40 per cent, followed by Dubai at 35 per cent, Fairfield (United States) at 26.6 per cent, Budapest at 25.7 per cent and Sofia (Bulgaria) at 25.4 per cent.

Construction levels remain highest by region in Asia Pacific with yearend data showing 15.4 million sq m, or 42 per cent of global construction. By comparison, five years ago just 8.6 million sq m was under construction in the same region.

Globally, Melbourne ranked 33rd in total floorspace under construction, while Sydney ranked 35th. The city with the most office stock under construction is Shanghai, followed by Moscow (see table below).

"Mid 2010 marked an inflection point for office markets," Ms Conisbee said.

"Tenant demand closely follows economic cycles, so it is not surprising that tenants began taking more space at this time. Investor demand also increased as access to finance improved and there was a marked improvement to net absorption.

"Investment sales activity was also up in the second half of 2010, relative to both the first half of 2010, as well as the same time period the previous year."

Sydney CBD recorded the highest of office sales in Australia and ranked 10th globally. London Metro recorded the most volume globally.

Melbourne CBD currently has the lowest initial yields in Australia at 7 per cent to rank 47th in the global top 50. Taipei is currently recording the sharpest yields at just 2.9 per cent.

Ms Conisbee said the outlook for 2011 is for continued growth, with Asia Pacific anticipated to remain the engine of growth for the global economy.

"Although economic expansion is expected to be below 2010 levels - due to attempts by China to slow growth, and the impact of higher energy costs - growth in the region is still anticipated to be seen well ahead of that in either the United States or Europe," she said.

"Leasing markets are expected to remain relatively robust, driven by both domestic and multi-national corporations.

"The emergence of a growing middle class in many of the countries within the region remains a dominant theme and one that is unlikely to end anytime soon.

"The continued delivery of office space will act as a drag on any material growth in rents; however, a trend towards a higher occupancy costs is expect to hold for most cities in the region with Australia no exception."

MEDIA CONTACT: Sarah Stewart, National Manager | PR & Communications Tel: +61 2 9257 0210 Email: Sarah.Stewart@colliers.com