Global office real estate markets will undergo a slow recovery, with several key markets poised to see growth continue through 2012 and 2013, according to Cushman & Wakefield's Global Office forecast. While 2011 began strongly in office markets around the world, apprehension and uncertainty led to a major bump in the road to recovery during the third quarter, resulting in a conservative outlook for the next year.
Global office real estate markets will undergo a slow recovery, with several key markets poised to see growth continue through 2012 and 2013, according to Cushman & Wakefield's Global Office forecast. While 2011 began strongly in office markets around the world, apprehension and uncertainty led to a major bump in the road to recovery during the third quarter, resulting in a conservative outlook for the next year.
Leasing activity through 2012 is best characterized as mixed, the property adviser said.
While for the most part of 2011 the European office market moved steadily towards becoming a landlords' market, recent economic instability has put occupiers back in the driving seat.
However, the declining availability of high-quality space has made it clear that current conditions will support a delayed rather than a cancelled recovery. Even while demand is weakening, businesses are still looking to improve productivity and cut costs. When it comes time to replace older space, consolidate, reorganize or achieve greater sustainability, tenants are faced with limited opportunities for high-quality space. This will ultimately drive rental growth in some markets.
Performance throughout Europe will vary by market. Overall vacancy is expected to see a modest fall, but some cities will see an increase due to lower demand or more development. While some areas, including Milan, Warsaw, Madrid and Stockholm, will see new building completions increase in 2012, overall development continues to drop throughout Europe. In 2009, new construction as a percentage of total inventory peaked at 3.7%, and is forecast to fall to 1.7% in 2011 and 1.4% in 2012/2013.
'While the number of active occupiers is forecast to increase, most will be seeking improved efficiency rather than expansion and 2012 is widely expected to be a difficult year,' said David Hutchings, head of European Research for Cushman & Wakefield. 'The market will remain very polarized but most markets are expected to see absorption soften and then bounce back in 2013.'
