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ColliersGlobalOfficeTrendsHighlightsMidYear2012FINAL En

ColliersGlobalOfficeTrendsHighlightsMidYear2012FINAL En

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Published by: Colliers International Thailand on Dec 26, 2012
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09/30/2013

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2013 OUTLOOK
GLOBAL Oice
2012 | office
The global economy has seen recent headwinds rom the smoldering eurozone debt crisis, slowing growth inChina’s economy and the orecasted American scal cli. Yet our overall global view o ofce real estate ismoderately positive. While many large occupiers have taken a wait-and-see attitude toward the global economy,others are leasing up much-needed space to accommodate expanding operations. Quality ofce buildings inmajor global cities are seeing consistent demand rom both occupiers and investors.
•
●U.S. is showing gradually lowering vacancy rates. Canada’s oce market continues to perorm welland is seeing notable development activity in major markets. Oce absorption has been largely drivenby Intellectual Capital, Energy and Education (ICEE) sectors.
•
Mexico and Brazil report slightly higher vacancies, due to a combination o speculative construction andslackening economic growth. Yet São Paulo still boasts the ultra-low vacancy rate o .%.
•
Average Central Business District (CBD) oce rents remained broadly unchanged across key EMEAmarkets, but this has been a result o limited supply more than increased demand. Business condenceacross Europe is rmly negative, which does not bode well or the next year o activity.
•
China’s slowing growth has dampened oce demand in some Asian markets. Beijing’s oce marketremains healthy, but appeared lackluster when compared to an extremely active .
GLOBAL OFFICE MARKETS SHOWSTABILITY IN THE FACE OF HEADWINDS
GLOBAL cAPiTALiZATiON rATes /Prime YieLDs: 10 LOwesT ciTiesmArKeT
(Ranked byJune )
JUNe2012Dec2011JUNe2011
Taipei
2.50 2.60 2.80
Hong Kong
2.67 2.94 3.22
Vienna
3.50 3.50 3.50
Singapore
3.90 4.20 4.30
London - West End
4.00 4.00 4.00
Zurich
4.00 4.10 4.10
Geneva
4.25 4.25 4.00
Beijing
4.31 4.32 5.93
Paris
4.50 4.50 4.50
Munich
4.50 4.50 4.50
Tokyo
4.50 4.50 4.60
GLOBAL Oice OccUPANcY cOsTs:TOP 10 ciTiesmArKeT
(Ranked byJune )
JUNe2012Dec2011JUNe2011
Hong Kong
166.70 178.34 185.91
London – West End
125.65 120.31 124.50
Tokyo*
106.01110.17104.91
Rio de Janeiro
90.4093.0585.70
Paris
87.5087.2397.73
Moscow
83.5875.7864.64
London
– City
76.1875.2977.97
Perth
75.7773.8574.74
Geneva
63.70 65.31 72.83
São Paulo
63.50 63.43 71.42
cBD cAP rATe (%)
cLAss A / NeT reNT (UsD/s/Yr)
10.259.009.004.904.754.704.004.003.903.502.672.500.01.02.03.04.05.06.07.08.09.010.011.0Rio de JaneiroMexico CityBuenos AiresNew York, NY - Midtown South ManhattanVancouver, BCNew York, NY - Midtown ManhattanLondon - West EndZurichSingaporeViennaHong KongTaipeiAsia PacicEMEANorth AmericaLatin America
TOP Three mArKeTs BY reGiON: JUNe 2012 cAP rATe (%)
*Tokyo rents listed are gross rents.
 
P. 2 | cOLLiers iNTerNATiONAL
trends and forecast
| 2012 | office | GLoBAL
Panama City 4,226,862Singapore 3,896,532Shanghai 5,480,466New York, NY -Downtown ManhattanRio de Janeiro 7,661,260Mexico City 8,481,452Jakarta 9,228,884Beijing 9,827,581Tokyo 11,325,147São Paulo 14,641,067MARKET JUNE 20125,200,000
6.5%$22.804.7%$35.806.5%$22.804.7%$35.804.75%$34.536%$21.645.5%$41.926.5%$16.856.5%$13.715.6%$24.716.2%$20.616%$25.634.9%$25.87
 
5%$23.147.8%$11.490%$36.8
$100 or more
$50 to $100
$25 to $50
less than $25N/A
New York-DowntownVictoriaVancouverCalgarySeattleBostonNew York-Midtown SouthNew York-MidtownMontrealChicagoDenverSan FranciscoAtlantaHouston
Average Class ANet Rents andCap Rates – June 2012
TOP 10 Oice mArKeTs wiTh The mOsT sPAceUNDer cONsTrUcTiON (sqUAre eeT)
Oce demand to remain stableOce demand to increaseOce demand to decrease
Oce Demand Outlook Arrows
GLOBAL 2013 OrecAsT:
•
Expect only modest improvement in North American ofce vacancy rates overthe next two years, with the exception o a ew strong ICEE markets.
•
Central and Eastern Europe are eeling the eects o economic stagnation.Greater certainty in the eurozone is still some ways away, although acontinued improvement in activity is expected by mid-2013.
•
Rents in UK regional markets should remain stable due to the lack o Grade Aspace. Most markets will reach a ‘tipping point’ by mid-2013 at which timeurther rental growth is expected.
•
The outlook or the Beijing ofce property market, especially in the Class Asector, should continue to be positive; with investment market in the ofceproperty sector to also remain strong.
> UNiTeD sTATes Oice DemAND DriVeN BY Tech, eNerGY
Intellectual Capital, Energy and Education (ICEE) markets continue to generate adisproportionate share o ofce absorption in the US, and nine o the 10 USmarkets with the highest Q2 absorption have strong ICEE industries, led byHouston, Oklahoma City and Boston. The average vacancy rate was 140 basispoints lower in ICEE-dominated markets.For the rst time in nearly ve years, in Q1 2012, the US ofce vacancy ratedropped below 15%. The rate continued to decline by 13 basis points to 14.29%in Q2. New supply is delivered to the market at approximately the same pace asthe trailing ve-quarter average. With 38.4 million square eet o new constructionstill underway, additions to supply will impede improvement in occupancy orrental rates over the next our to eight quarters.
Untd stat: 2013 Outlook
CBD ofce buildings are outperorming the suburbs as companies consolidateoperations into the central core o Metropolitan Service Areas (MSAs), and thistrend will continue in 2013. Large spaces are in stronger demand as a result othis consolidation. As in 2012, landlords will be able to increase rents or largespace users at lease renewal.Proessional and business service employment accounted or approximatelyone-third o the monthly job growth in 2012, averaging 150,000 per month.However, the ate o the ofce vacancy rate does not merely depend upon anincrease in ofce workers; new construction also plays a role in the calculation.As a result, the 2012 vacancy rate’s drop below 15% is not likely to be betteredby a 14% vacancy rate in 2013. Look or only modest improvement in ofcevacancy rates over the next two years.
> resOUrces sUPPOrTiNG cANADiAN DemAND, BOND rATesDriViNG iNVesTmeNT
Observers expect continued slow and steadyeconomic perormance, with no exceptional wins or losses on the radar orCanada. The divide between the east and west is rmly entrenched, with theenergy and mining sectors driving stronger results in Alberta, Saskatchewanand British Columbia. Ontario and Quebec will post more moderate growth, asthe economy in the United States gradually improves, exports gather speed andthe manuacturing sector recovers.
canada: 2013 Outlook
Economic growth will be impacted by a retraction o government stimulusspending and weakening consumer activity as household debt curtails retailsales growth. The undamentals o all major ofce markets continue to be verysolid, with the national vacancy rate under 6%. Demand or ofce space will bemuted in the east, while resource-oriented western markets continue to be hot.
As a result,  should end with a steady perormance, with a urther pick-up in
Rents are US$/SF/YR.
 
trends and forecast
| 2012 | office | GLoBAL
P. 3 | cOLLiers iNTerNATiONAL
9%$31.20
Mexico City
10.25%$90.409%$34.21
Rio de JaneiroBuenos Aires
$100 or more
$50 to $100
$25 to $50
less than $25N/A
Average Class A Net Rentsand Cap Rates – June 2012
São Paolo Skyline
growth commencing in . The investment market will continue to be very activewhile bond rates remain low and investors turn to real estate as a sae yield-producing investment. Key risks on the Canadian radar are the ragile condition oEurope, the U.S. Fiscal Cli and slowing growth in resource-hungry emergingeconomies.
> meXicO’s ecONOmic GrOwTh DriVes Oice DemAND ANDcONsTrUcTiON
Mexico City saw the construction o more than . millionsquare eet o oce space in the rst hal o , which has pushed up overallvacancy rates. , square eet were absorbed in the rst quarter o  andmore than . million square eet in the second.This % increase in market activity is to some extent due to the addition obuildings with pre-leased space to the inventory. It is worth noting that even withincreased inventory, average rental rates did not show signicant fuctuations andremained relatively stable.
mxo: 2013 Outlook
The Mexican economy will continue to advance at a steady pace, with employmentand wages showing slight increases and a GDP growth rate that is expected toreach .% by the end o , and continue this trajectory in . The recentlyelected Institutional Revolutionary Party presidential candidate Enrique Peña Nietowill push or some energy and labor reorms, however the initiatives o the newadministration should not signicantly shit Mexico’s growth trajectory.
> sÃO PAULO BOAsTs LOw VAcANcY, ALThOUGh ABsOrPTiON hAsmODerATeD
Brazil’s dynamic economy o recent years has contributed to a newglobal perception o Brazil as a hub or investment and capital. The cities o Rio deJaneiro and São Paulo have a combined Class A oce inventory o more than million square eet and Rio de Janeiro has no room or new buildings in itsdowntown. The average vacancy across both cities is .%. Rio de Janeiro’svacancy is .% while São Paulo’s is only .%.
Bazl: 2013 Outlook
Despite low vacancy rates, there has been some moderation in oce demand. Theaverage asking lease prices decreased by .% rom Q to Q  in São Pauloand Rio de Janeiro. Net absorption in Q was the lowest it has been since the thirdquarter o . Thereore, we predict slackening demand and limited supply willprovide only a slight increase in occupancy and rental rates through .
Rental rate changes are calculated using period US$ exchange rates and may refectfuctuations in currency exchanges. Rents are US$/SF/YR.

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