GLOBAL - Global office property markets continue to face uncertainty and tough times ahead but should start recovering in 2010, suggests the latest research by Cushman & Wakefield.
The report, entitled ‘Office Space Around the World 2009', predicted slowing occupational demand, delayed decisions and longer transaction periods as a result of tenants becoming more cautious, will continue to dampen the global occupational office market in 2009.
Cushman & Wakefield said it anticipates there will be a widespread fall in rents caused by companies cutting back costs and more availability of space, and added markets located in economies with excess debt and greater exposure to financial markets are expected to be the most affected.
All of Europe's key office markets are expected to suffer negative rental growth in 2009, with the UK and Eastern Europe expected to experience the steepest falls.
The firm said the US and Canada will also suffer and see double digit falls in rental growth while Asia, Africa and the Middle East are expected to recover before Europe and North America.
Despite fairly supportive levels of supply and demand in the first half of 2008, global rents rose by only 3% over the year compared to 14% in 2007, according to Cushman & Wakefield. Europe's rental growth grew by only 2% in 2008 as a result of occupier demand slowing and corporations becoming more cost-conscious in response to the looming recession.
Markets carrying the greatest debt, such London, Madrid and Dublin, suffered throughout 2008, however most office markets performed well in the first half of the year.
Central and Eastern Europe's rental growth was slightly higher at 4%, helped by the relatively robust economic growth of its markets.
Primary markets in Canada and North America maintained a steady performance, recording a rental growth of 6% and 4% respectively, and Boston and Dallas were the only office markets in the US to record an annual decrease.
Asia was one of the worst performing regions in term of rental growth, said C&W, as the economic crisis in the Hong Kong, Tokyo and Singapore markets caused rental growth to fall from 25% in 2007 to just 4%.
Emerging office markets delivered the strongest rental growth, with South America recording growth of 12% and Africa and the Middle East 9%.
In al, Kuala Lumpur saw the highest growth, with 58%, as a result of high demand over the first three quarters of the year and turkish markets also performed well, recording growth of 27%.
Of the 57 countries included in the research, 35 showed rental growth, 15 showed stable rents and only 7 saw rents fall.
Hong Kong was the most expensive location for offices in 2008, knocking London off the top spot and into third place behind Tokyo. Total occupancy costs for Hong Kong stood at €1,743 per square metre.
Rental falls of 23% and the effect of currency fluctuations on property values contributed to London's lower ranking.
Dubai was the city to move the most places up the board, climbing from 8th to 5th place followed by Mumbai, Paris and Damascus. Dublin fell outside the top 10 most expensive locations.
Cushman & Wakefield said vacancy rates will reach their peak in 2010, as development completions and space rationalisation has led to an increase in supply levels and second-hand space.
The postponement of new developments and the shortage of modern efficient property are predicted, however, to prevent oversupply in many markets.
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