Rental growth signs of recovery. Global Office Index Q4 2013

Transcription

1 Rental growth signs of recovery Global Office Index 2013

2 2 Global Office Index, 2013 Jones Lang LaSalle Global Office Index 2013 Rental growth - signs of recovery A quiet office leasing market during 2013 was reflected in weak rental performance throughout the course of the year. Jones Lang LaSalle s Global Office Index, which tracks the performance of prime office space in 95 major markets, revealed that rents increased by 1.3% in 2013, which followed a disappointing 1.4% in A few cities stood out, however, and managed to achieve double-digit growth Jakarta was the year s star rental performer, Dublin and Dubai rebounded strongly from deep recessions, and London s rents were helped by a strengthening leasing market. Meanwhile demand from the technology sector continued to boost rents in tech-rich cities in the U.S. such as San Francisco. But while overall rental performance across the globe was subdued in 2013, there were tentative signs of recovery in the final quarter. Following virtually no change in the Index during and, rents on prime assets increased by 0.5% in. Momentum is expected to continue to build during with a combination of brighter economic prospects, improving corporate demand and a low supply pipeline pushing leverage in favour of landlords - and to be led by several of the larger gateway cities, where rental growth is forecast to exceed 4%. Regional Overview: The Americas was the best performer of the three main global regions in A further 0.6% increase in the final quarter contributed to full-year growth of 2.6% on the back of expansion across U.S. cities. Asia Pacific s markets saw a marginal 0.2% quarterly growth in net effective rents. The strength of a handful of Asian markets helped to offset ongoing corrections in Australia. In Europe, aggregate rental growth returned to positive territory and rose by 0.7% over the quarter, with improving corporate sentiment in line with stronger evidence of economic expansion. Rental growth in Dubai boosted the MENA Index by 0.6% during the quarter and by 4.8% year-on-year. Market Performance: The top performers (on an annual basis) once again included the major U.S. technology-rich markets such as San Francisco Peninsula (+13.5%), Austin (+7.8%) and Seattle (+7.7%), while over the border in Mexico, Monterrey achieved +11.9%. Two office hubs in emerging South East Asia, Jakarta (+25.8%) and Bangkok (+11.5%), continued to outperform the Asia Pacific region, while Singapore (+8.4%) staged a strong comeback. The top ranks now include more markets in Europe and MENA, e.g. London (+10.5%) and Edinburgh (+9.3%). Dublin (+16.7%) and Dubai (+14.6%), markets that were hit badly by the GFC, are now bouncing back strongly. At the opposite end of the spectrum, weak net absorption in Australia contributed to Perth (-15.2%), Brisbane (-14.4%), Melbourne (-10.9%) and Sydney (-5.0%) all featuring among the weakest performers. A large development pipeline is pushing down rents in cities such as São Paulo (-10.3%), Riyadh (-10.0%), and Santiago (-4.6%), while rents have fallen in Cairo (-12.5%) due to last year s political unrest. There were also some underperformers in Asia, notably Beijing (-7.4%), Seoul (-1.8%) and Hong Kong (-1.2%), and in the Eurozone Milan (-10.0%) and Paris (-7.8%).

3 3 Global Office Index, 2013 Global Office Index Prime Rents, Rental Index ( 2000 = 100) 210 Asia Pacific 200 Americas 190 Europe 180 GLOBAL Asia Pacific stock weighted average of 27 markets; Americas stock weighted average of 39 markets; Europe stock weighted average of 24 markets. Global Index based on GDP weighted average of the Asia Pacific, Americas, Europe and MENA indices. Source: Jones Lang LaSalle, February A subdued Asia Pacific region In Asia Pacific, net effective rents grew in just one-third of all markets in However, the Asia Pacific Office Index increased by 0.2% quarter-on-quarter on the strength of a handful of markets, as compared with a marginal 0.1% decline in and a post-gfc average growth of 1.0%. The greatest quarterly rental uplift was in Singapore (4.2% in ) on low and falling vacancy. Quarterly growth continued to ease in Jakarta (2.2% vs.4.4% in ) to its slowest pace since Small rental increases were seen in Tokyo, Shanghai and a few emerging SEA markets (e.g., Manila). Rents declined in Hong Kong Central (-1.6% in ), driven by vacancies in some major buildings, while rents in Beijing CBD fell for the fifth consecutive quarter (-0.9%). Rents continued their downward direction in all Australian CBD markets (with the biggest decreases in Brisbane and Perth) on the back of weak leasing demand. Conditions in Europe stabilise In Europe, prime office rents remained stable in 18 of the 24 Index markets, with improving corporate sentiment in line with stronger evidence of economic expansion. London continued to show the strongest performance (+5.0%) with the release of pent-up demand. Rents grew by 0.7% in Paris following a sharp decline in, and also improved in Edinburgh (+1.7%) and Frankfurt (+1.4%). Only two cities saw small quarterly rental falls, namely Barcelona (-1.4%) and Milan (-2.2%). As such, the European Office Index returned to positive territory, rising by 0.7% over the quarter as compared with a 1.1% decline in. Moderate rental growth in the Americas The Americas Office Index grew by 0.6% in 2013, at the same pace as in, with a broader expansion across most U.S. markets being partly offset by continued weakness in some Latin American and select U.S. and Canadian cities.

4 4 Global Office Index, 2013 For the year, the regional office index increased by 2.6%, but this is below the 3-4% annual growth seen in U.S. cities accounted for seven of the top 10 quarterly rental performers in the region, including San Francisco Peninsula (+5.4%), Detroit (+3.3%) and Tampa (+2.9%). Among the non-us cities, Monterrey registered the strongest quarterly rental uplift (+11.5%), followed by Toronto (+3.7%) and Rio de Janeiro (+2.8%). At the opposite end of the spectrum, several markets recorded rental declines in Among U.S. markets, Fairfield County and Atlanta saw the sharpest rental falls in (both at -3.6%), followed by Baltimore (-2.1%) and Chicago (-1.6%). In Latin America, rents were down in São Paulo (-3.1%) and Santiago (-1.6%) due to new supply additions and/or weaker economic growth sees steadier markets in MENA Following four years of negative performance, 2013 has seen signs of an improvement in MENA. The MENA Office Index grew by 0.6% in, resulting in an annual rise of 4.8%. This increase continues to be primarily driven by Dubai, the region s largest office market, which saw prime rents advance by 14.6% in Elsewhere in the region, prime rents remained unchanged in. Jeddah continued to experience good demand for prime office space and is the only market outside Dubai to have witnessed a growth in rents in 2013 (+3.5%). The Cairo market is now stabilising, following a sharp decline in (with rents falling 12.5% in 2013). Global Office Index Prime Rents, Quarterly Movements Rental Change (% Q-o-Q) Americas Europe Asia Pacific Middle East and North Africa Global Source: Jones Lang LaSalle, February 2014

5 5 Global Office Index, 2013 Momentum returns in 2014 As economic growth accelerates and business confidence improves during 2014, we anticipate a greater willingness among corporate occupiers to move forward with longerterm real estate strategies. A rise in leasing volumes will be met with low levels of new supply, resulting in greater leverage for landlords. As supply tightens in 2014, rental growth is expected to accelerate to about 4%. Among the larger markets, the top performers are projected to be Singapore, Tokyo, Dubai, London, San Francisco and New York. In Asia Pacific, corporate occupiers are likely to remain cautious, and single-digit growth is generally anticipated for 2014 (average growth of around 4% regionally). The biggest uplifts are forecast to take place in Singapore and Tokyo, as well as Jakarta (but sharply below 2013 rates). Hong Kong should start recovering, but Beijing and Australia are still predicted to remain the weakest performers, with small rental declines expected for most Australian cities for the year. In Europe, the forecast recovery in economic activity and employment, coupled with a shortage of quality supply, should support rental growth this year. While remaining cost-conscious, corporate occupiers are likely to be more prepared to invest in modern, Grade A space in order to drive efficiency and productivity. Conditions will, however, continue to vary by market. While London is expected to maintain its clear momentum, growth in the German centres and the Nordics is predicted to be moderate and more selective over Paris is likely to see a period of consolidation with rents around the current level. At the same time, Southern European markets, such as Barcelona, Madrid and Milan, are forecast to finally reach the bottom of their cycle. The recovery in prime office rents in the Americas is expected to strengthen over the course of 2014, with annual growth projected to reach 4% by year-end, due to a broadening recovery throughout the U.S. and better performance in some of the region s largest office markets. By early 2015, the Americas Office Index will likely have surpassed the prior peak recorded in In the MENA region, Dubai is on track to see a continued improvement in rentals over Rents in the capital cities of Abu Dhabi (UAE) and Riyadh (Saudi Arabia) are likely to move in opposite directions this year, with rental growth forecast for Abu Dhabi, while those in Riyadh may soften in the face of significant levels of new supply. The prospects for Cairo in 2014 remain largely dependent upon the process of political transformation, which continues to be a prerequisite for stronger economic growth. As a result, the region is expected to record a modest rent increase of 3-5% in aggregate during 2014.

6 6 Global Office Index, 2013 Top 10 Global Performers in 2013 Jakarta Dublin Dubai San Francisco Peninsula Monterrey Bangkok London Edinburgh San Francisco Singapore Americas Europe Asia Pacific MENA % change y-o-y Based on rents for Grade A space. In local currency. Source: Jones Lang LaSalle, February 2014 Technical Note Jones Lang LaSalle s Global Office Index is derived from the weighted average of the rental movements of Jones Lang LaSalle s European, Asia Pacific, Americas and Middle East and North African (MENA) Regional Indexes that cover 95 office markets in total. They are weighted by real GDP (US dollar basis) for each region from IHS Global Insight. Weights are adjusted annually. The latest weights are 31% - Europe; 29% - Asia Pacific; 34% - Americas; 6% - MENA (percentages are rounded). The European Office Index is calculated from the change in headline face rents for the highest-quality space in the premier office sub-market in 24 European cities, weighted on the basis of the total office stock (all grades) in each city s overall market. The Asia Pacific Office Index is calculated from the change in average Grade A rents (net effective) in the main sub-market in 27 Asia Pacific cities, weighted on the basis of Grade A stock in the main sub-market of each city. The Americas Office Index is calculated from the change in average Class A rents (gross asking in North America, triple net in Latin America) in the CBD, Downtown, central areas or primary investment market of 39 Americas cities, weighted on the basis of Class A stock (DC city for Washington, DC; Hudson Waterfront for New Jersey; Palo Alto for Silicon Valley; Midtown for New York; Westside for Los Angeles; Greenwich Overall and Stamford CBD/Railroad for Fairfield County; South County for San Francisco Peninsula; overall Downtown market for Seattle; Tampa CBD-only for Tampa The MENA Index is calculated from the change in headline face rents for the highest-quality space in the premier office sub-market in five cities, weighted on the basis of the total office stock in each city s overall market.

7 7 Global Office Index, 2013 Jones Lang LaSalle Global Office Index Quarterly Rental Performance across 95 Cities Quarterly Change 2013 vs 2013 Global 0.5% Europe 0.7% Asia Pacific 0.2% Americas 0.6% MENA 0.6% 1 Monterrey 11.5% 2 San Francisco Peninsula 5.4% 3 London 5.0% 4 Singapore 4.2% 5 Toronto 3.7% 6 Detroit 3.3% 7 Tampa 2.9% 8 Bangkok 2.8% 8 Rio de Janeiro 2.8% 10 Wellington 2.7% 11 Charlotte 2.5% 12 Austin 2.4% 13 Jakarta 2.2% 14 Shanghai 1.9% 14 Oakland-East Bay 1.9% 16 Kuala Lumpur 1.8% 16 Los Angeles 1.8% 18 Edinburgh 1.7% 19 Seattle 1.6% 19 Portland 1.6% 21 Frankfurt 1.4% 21 New York 1.4% 23 Manila 1.3% 24 Dubai 1.1% 24 San Francisco 1.1% 26 Houston 1.0% 26 Guangzhou 1.0% 26 Philadelphia 1.0% 29 St. Louis 0.8% 30 Paris 0.7% 31 Boston 0.5% 32 Tokyo 0.4% 33 Denver 0.3% 33 New Jersey 0.3% 33 Silicon Valley 0.3% 36 Montreal 0.2% 36 Miami 0.2% 36 San Diego 0.2% 39 Taipei 0.0% 39 Amsterdam 0.0% 39 Berlin 0.0% 39 Brussels 0.0% 39 Budapest 0.0% 39 Dublin 0.0% 39 Düsseldorf 0.0% Quarterly Change 2013 vs Hamburg 0.0% 39 Luxembourg 0.0% 39 Lyon 0.0% 39 Madrid 0.0% 39 Moscow 0.0% 39 Munich 0.0% 39 Prague 0.0% 39 Rotterdam 0.0% 39 Stockholm 0.0% 39 The Hague 0.0% 39 Utrecht 0.0% 39 Warsaw 0.0% 39 Mumbai 0.0% 39 Ho Chi Minh City 0.0% 39 Delhi 0.0% 39 Bangalore 0.0% 39 Phoenix 0.0% 39 Mexico City 0.0% 39 Abu Dhabi 0.0% 39 Jeddah 0.0% 39 Riyadh 0.0% 39 Cairo 0.0% 68 Buenos Aires -0.1% 68 Adelaide -0.1% 68 Washington, DC -0.1% 68 Chennai -0.1% 68 Dallas -0.1% 73 Orlando -0.3% 74 Seoul -0.5% 74 Auckland -0.5% 76 Calgary -0.6% 76 Vancouver -0.6% 76 Sydney -0.6% 79 Osaka -0.7% 80 Beijing -0.9% 81 Barcelona -1.4% 82 Hong Kong -1.6% 82 Chicago -1.6% 82 Santiago -1.6% 85 Melbourne -1.7% 86 Baltimore -2.1% 87 Milan -2.2% 88 Canberra -2.4% 89 São Paulo -3.1% 90 Atlanta -3.6% 90 Fairfield County -3.6% 92 Hanoi -4.1% 93 Brisbane -4.8% 94 Perth -5.9% 95 Bogota N/A

8 8 Global Office Index, 2013 Annual Rental Performance across 95 Cities Annual Change 2013 vs 2012 Global 1.3% Europe -0.1% Asia Pacific 0.7% Americas 2.6% MENA 4.8% 1 Jakarta 25.8% 2 Dublin 16.7% 3 Dubai 14.6% 4 San Francisco Peninsula 13.5% 5 Monterrey 11.9% 6 Bangkok 11.5% 7 London 10.5% 8 Edinburgh 9.3% 9 San Francisco 9.2% 10 Singapore 8.4% 11 Austin 7.8% 12 Seattle 7.7% 13 Frankfurt 6.1% 14 Düsseldorf 5.8% 15 Kuala Lumpur 5.0% 15 Luxembourg 5.0% 17 Los Angeles 4.7% 18 Auckland 4.5% 18 Oakland-East Bay 4.5% 18 Wellington 4.5% 21 Charlotte 4.3% 21 Manila 4.3% 21 Taipei 4.3% 24 New Jersey 4.2% 24 Toronto 4.2% 26 Boston 3.7% 26 Mexico City 3.7% 26 Houston 3.7% 26 Portland 3.7% 30 New York 3.6% 31 Jeddah 3.5% 31 Rio de Janeiro 3.5% 33 Chennai 3.4% 34 Tokyo 3.3% 34 Detroit 3.3% 36 Tampa 3.2% 37 Shanghai 2.6% 38 Fairfield County 2.5% 39 San Diego 2.2% 40 Denver 2.1% 41 Silicon Valley 1.8% 42 Guangzhou 1.7% 43 Munich 1.6% 43 Philadelphia 1.6% 45 Washington, DC 1.5% 46 Mumbai 1.4% 47 Bangalore 1.1% Annual Change 2013 vs Dallas 0.9% 49 St. Louis 0.8% 50 Baltimore 0.7% 51 Vancouver 0.5% 52 Orlando 0.3% 52 Phoenix 0.3% 54 Amsterdam 0.0% 54 Berlin 0.0% 54 Brussels 0.0% 54 Hamburg 0.0% 54 Madrid 0.0% 54 Moscow 0.0% 54 Rotterdam 0.0% 54 Stockholm 0.0% 54 The Hague 0.0% 54 Utrecht 0.0% 54 Delhi 0.0% 65 Chicago -0.1% 66 Ho Chi Minh City -0.3% 67 Montreal -1.1% 68 Hong Kong -1.2% 69 Miami -1.5% 70 Seoul -1.8% 71 Calgary -2.1% 72 Prague -2.4% 73 Budapest -2.5% 74 Abu Dhabi -2.8% 75 Osaka -3.1% 76 Warsaw -4.0% 77 Barcelona -4.2% 78 Buenos Aires -4.3% 78 Atlanta -4.3% 80 Santiago -4.6% 81 Sydney -5.0% 82 Lyon -5.3% 83 Adelaide -6.0% 84 Beijing -7.4% 85 Canberra -7.6% 85 Hanoi -7.6% 87 Paris -7.8% 88 Milan -10.0% 88 Riyadh -10.0% 90 São Paulo -10.3% 91 Melbourne -10.9% 92 Cairo -12.5% 93 Brisbane -14.4% 94 Perth -15.2% 95 Bogota N/A

9 9 Global Office Index, 2013 About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialised real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of US$4.0 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 3.0 billion square feet. Its investment management business, LaSalle Investment Management, has US$47.6 billion of real estate assets under management. For further information, visit About Jones Lang LaSalle Research Jones Lang LaSalle s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today s commercial real estate dynamics and identify tomorrow s challenges and opportunities. Our 350 professional researchers track and analyse economic and property trends, and forecast future conditions in over 70 countries, producing unrivalled local and global perspectives. Our research and expertise, fuelled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. For more information contact: Dr Jane Murray Head of Research, Asia Pacific jane.murray@ap.jll.com Ben Breslau Managing Director, Americas Research benjamin.breslau@am.jll.com Dr Lee Elliott Head of Research, EMEA + 44 (0) lee.elliott@eu.jll.com Jeremy Kelly Director, Global Research + 44 (0) jeremy.kelly@eu.jll.com Contributing Authors: Myles Huang Director, Asia Pacific Research myles.huang@ap.jll.com Josh Gelormini Vice President, Americas Research josh.gelormini@am.jll.com Craig Plumb Head of Research, MENA craig.plumb@eu.jll.com Oliver Kummerfeldt Associate Director, EMEA Research +44 (0) oliver.kummerfeldt@eu.jll.com COPYRIGHT Jones Lang LaSalle IP, Inc This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.