A global slowdown in office leasing demand is forecast this year, with leasing volumes expected to be 5-10% lower than in 2019, according to new research from JLL.
The firm's Global Market Perspective has found that leasing has started to slow from its 2018 peak, particularly in Asia Pacific and the Americas, although investment volumes in the sector hit record levels in 2019 at $800 bn (€738 bn).
However, European office markets look more resilient, after 2019 recorded the third consecutive year of 4%+ annual rental growth across the continent. This is likely to slow from 2.2% in 2020 to 1.1% in 2021, according to JLL, although annual aggregate office rental growth will remain positive.
European development activity has accelerated, with office completions forecast to reach 7.1 million m2 in 2020, before peaking at 8.5 million m2 in 2021. JLL said that that the next three years will see significant increases in development compared to the long-term trends.
Despite a slight slowdown in Q4, 2019 was a record year for the European market, with take-up reaching 14 million m2, up 2% from 2018.
Though Brexit uncertainty has caused London take-up to drop, 2019 levels remained 5% above the 10-year annual average, testifying to the strength of the market, JLL found.
Flexible lease terms, agile design and hospitality services look set to become the norm in the commercial real estate sector, the report showed, with even large corporates embracing the trend towards flexibility, accounting for approximately 40% of the flexible office industry’s revenue.
