GLOBAL – Office rents in Brazil and Colombia largely drove a global 3% increase in prime office rents last year as continuing economic uncertainty stalled growth in Asia's growth economies, according to a report from Cushman & Wakefield.
Prime rents in Brazil rose 10%, with multinational demand making Rio de Janeiro the most expensive per-square-foot location in the region.
Specifically, rents increased 40% in the significantly undersupplied Zona Sul submarket.
Colombia registered the highest increase, at 52% for prime.
But despite rental improvement across South America – notably Chile, Ecuador and Peru – the report pointed out that these markets lag behind prime locations, and rents remain low in Quito, despite strong demand, low vacancies and limited new supply.
Describing the regional rate of expansion as "undoubtedly spectacular", the report warned that the increase had in many cases started from a low base.
Elsewhere in Latin America, significant rental growth is unlikely before 2014, although Mexico posted a modest (7%) increase as a result of demand outstripping scarce prime.
The report based its positive forecasts for the central business district (CBD) of Mexico City, the capital that accounts for 80% of market activity, on the basis of continued demand for prime from its US trading partner and domestic macro growth.
Meanwhile, Asian rents boasted only moderate growth (3%) amid cautious occupier demand as a result of a slowdown in its two growth economies.
However, rents increased in at least 50% of regional markets amid relatively low vacancies.
China, Hong Kong and Japan all saw prime rental declines.
In Hong Kong, an erosion in demand from the financial services sector coincided with tenant relocations.
Beijing saw a similar trend, with workplace strategies – occupiers' decisions to move to lower-rent locations and/or delay expansion plans – emerging as a significant theme.
CBD rents in Beijing remained unchanged over the year, but the report claimed the capital would remain landlord-led as a result of limited supply in core submarkets.
The report's authors expect occupiers to remain cautious in 2013 despite an anticipated return to positive macro growth – except in Manila and Jakarta, where strong domestic economies will drive an ongoing upward trend.