Global office market showing improvement: CBRE

Increased demand, together with more relocation activity, is slowing rental declines in the majority of global office markets, with growth beginning to accelerate in three major markets, according to the latest Global Office Rental Cycle report from CB Richard Ellis Group. Overall, a tentative recovery of property markets is emerging, reflecting the improved economic activity globally.

London's West End and Hong Kong joined London City in the first quarter of 2010 as the first markets to begin to see rents recover, with rents levelling off in Sydney and Shanghai. A slowing of rental decline was also seen in Washington DC and Mexico City, among others.

Raymond Torto, Global Chief Economist, CBRE, said: 'Cities in all regions, including Washington DC, Singapore and Paris, moved forward in the rental cycle in the first quarter following improvements in demand. Relocations continue to be the main driver of activity, but there are also signs of expansion activity in a few markets, including Paris and Sydney.'

With the global economy expected to grow by around 4.5% in 2010, the latest research from CBRE shows that economic recovery, characterised by stronger growth in emerging markets such as India and China rather than in developed markets such as the US, UK and Japan, is reflected in property markets around the world.

Nick Axford, head of EMEA Research at CBRE said: 'We have witnessed rental growth in a few advanced economies, represented by key global markets like London and Hong Kong. London continues to lead the recovery with sustained rental growth in the City market and we are now at a pivotal point in the cycle for London’s West End where tenant incentives are beginning to dry up.'

With prospects for the global economy still uncertain, considerable risks remain in relation to lending and liquidity, government debt and levels of policy support. Despite economic reports indicating an optimistic outlook, CBRE cautions that it is not until sustained employment growth returns and demand for office space gains significant momentum that markets globally will begin to rebound significantly.