GLOBAL - Demand for office space in the Latin American and Asia Pacific regions is stronger than in advanced economies as investors bet on better economic growth in those markets, according to a report from CB Richard Ellis (CBRE).
Andrew Hallissey, head of client solutions in CBRE's Global corporate services division, said: "Many multinationals companies have reacted to this trend with an increased desire to locate their global operations strategically, in locations where strong growth and promising economic markets exist.
"In doing so, a trend for increased global office development has arisen in emerging markets."
CBRE said the global office market remained polarised as corporations increased investment at a faster pace in the emerging markets where growth was more robust.
Richard Holberton, director of EMEA research, said: "Global corporates continue to fuel the Asia Pacific office market, as the region returned to levels of demand not seen since prior to the global financial crisis."
Indeed, the strongest forecasts in 2011 and 2012 are not in the advanced economies, but the emerging markets.
In 2010, 43m square feet, or 46% of newly developed office space worldwide, became available in Asia. In 2011, CBRE expects nearly 55m square feet of new office developments to become available in the region, accounting for 62% of the global total.
Although the rising cost of moving and occupying office space may start to slow business expansion, the demand for property is likely to result in strengthening of absorption levels in 2011.
Office markets across the world are characterised by a 'flight to quality', where tenants are taking advantage of low rents for prime office space, due mainly to economic uncertainty in the last several quarters.
Many occupants are seizing the opportunity to upgrade or expand their office space into newer, higher-quality buildings, CBRE said.
However, the research firm said the rate of recovery in the Asia Pacific markets might slow down next year while Europe and the US will take a longer time to recover.
Compared with Asian cities, growth in European cities remained relatively slow, except in the case of Germany, where a strong recovery is helping the demand for office space.
Prime office rents in Europe increased by 2.7% over the course of 2010, with growth being driven by a handful of markets including London, Paris and Moscow.
Other cities are only starting to show the first signs of rental recovery, CBRE said.
The situation in Germany is different, however. In Frankfurt, annual take-up reached 473,000 square meters in 2010, up 32% from 2009 and characterised by a relatively high share of owner-occupied space.
Barring any uncertainty that might derail or slow down the pace of recovery, an across-the-board revitalisation in office demand hinges upon a healthy employment levels, the company said.
A robust job market will lead to increased office demand, followed by increased absorption, falling vacancy rates, increasing new developments and, ultimately, stronger upward rental growth.
Coming out of a serious downturn, the global economy is suffering from a "sprained ankle", which is facing "an especially guarded recovery".
Further, the recent political turmoil in the Middle East and the earthquake in Japan have added complexity to the world economy, still reeling from the repercussions of the financial crisis, CBRE said.