ASIA PACIFIC CONTINUES TO LEAD GLOBAL OFFICE RENT REBOUND
More than half of the office rental markets in Asia Pacific either stabilized or moved into the growth phase during the second quarter (Q2) of 2010, demonstrating that the region continues to lead the global real estate recovery, according to CB Richard Ellis’ (CBRE) latest quarterly Global Office Rental Cycle report.
Globally, cities in all regions generally moved forward in the global rental cycle during the quarter, with office demand remaining stable or improving in most locations. The financial and corporate sectors have boosted demand for office space in Asia and Europe, supported by growth in private demand and employment stabilization in mature economies during the past quarter.
The Europe, Middle East and Africa (EMEA) region finished the quarter just behind Asia Pacific in terms of office rental recovery, with many of the region’s markets now experiencing rental growth or reaching the bottom of the cycle. Most major markets across the Americas were clustered around the ‘rental decline slowing’ position in the cycle at the end of Q2, meaning that rents are still falling but at a slower rate.
Dr. Raymond Torto, Global Chief Economist, CBRE, said: “Asia Pacific was the driving force behind continued recovery in global office markets in the second quarter, with over half of markets in the region either at the bottom of the rental cycle or in growth mode. Hong Kong, Shanghai and Beijing led the region’s markets due to a push for office space from the financial sector in central business locations and an increased demand for Grade A space in Hong Kong. Singapore, Bangalore and Mumbai followed closely as employment levels improved and prime rents and incentives remained stable.”
“While Europe is slightly behind Asia Pacific in terms of the percentage of office markets registering rental growth, the City of London continues to lead the other key global markets in terms of the scale of rental growth seen to date. This is due to increased demand in the financial sector. Furthermore, despite expectations of a slowdown in growth, rents in London’s West-End remained stable in the second quarter,” continued Torto.
Paris experienced a notable increase in office rents in Q2 2010. Prime rents rose by 3% and further rises are expected over the coming months, triggered by reasonable levels of demand and a shortage of good quality space – due partly to a lack of development in central locations.
“Budapest along with other CEE markets is close to the bottom of the cycle. We stopped reporting about falling rents in Q2, nevertheless this not mean any increase either.” – commented on the Hungarian trends Gábor Borbély, CEE regional analyst. “Except for the prime office space in Eastern European cities, rental levels are rather flat in the region. However, as pipelines are low, there can be a shortage of quality office space and this can help increase rental levels in the mid term.”