GLOBAL OFFICE INDEX Global Foresight Series Global Office Index Q Rental Growth Slows Further

Transcription

1 GLOBAL OFFICE INDEX Global Foresight Series 2012 Global Office Index Q Rental Growth Slows Further

2 2 Global Office Index, Q Jones Lang LaSalle Global Office Index Q Rental Growth Slows Further Jones Lang LaSalle s Global Office Index tracks the rental performance of prime office space across 90 major markets in the Americas, Asia Pacific and Europe. This fifth edition indicates a deceleration in rental growth, with just over one-third of all monitored markets registering rental increases during Q Rents for prime office space in the world s major cities grew by an average of 0.2% during Q3 2012, down from 0.6% in Q On an annualised basis, prime rents were up 2.0%, the lowest year-onyear growth in two years. Asia Pacific s markets have seen quarterly rental growth moderate from 1.0% in Q2 to just 0.5% in Q3, largely due to slower rental uplift in markets such as Shanghai and Beijing, coupled with further declines in Hong Kong and Singapore and falls in most Australian markets. As economic headwinds strengthen, the Americas also saw growth decelerating to 0.6% quarter-on-quarter from the 1.1% registered in Q2. Given the negative economic backdrop, rents in Europe corrected by a further 0.4%, the third consecutive quarterly decline. Across the 90 monitored markets, Jakarta (+34.2% y-o-y) and Beijing (+31.8%) rank as the strongest performers. A number of Latin American markets also feature in the top 10 : Mexico City (+26.3%), São Paulo (+12.5%) and Monterrey (+9.1%). Robust demand from the technology and commodities sectors continues to support healthy annual rental growth in a number of markets such as San Francisco (+18.8%), Silicon Valley (+10.5%), Perth (+11.7%), Bangalore (+9.4%) and Chennai (+8.3%). A third of the markets covered by the Index registered rental declines in Q3, compared with just a quarter of all markets in Q2, reflecting a range of factors including weak corporate occupier demand (particularly from the financial sector), oversupply or poor economic fundamentals. The largest quarterly falls were recorded in Detroit (-4.5%), Melbourne (-3.1%) and Brisbane (-2.4%). In Europe, Paris, Milan, Madrid, Utrecht and The Hague all registered declines of between 1.9% and 2.4%, while in Asia Pacific, Singapore and Hong Kong experienced decreases of 1.2% and 2.2% respectively. In the Americas, the Canadian markets of Toronto, Vancouver and Montreal all recorded declines of between 1.2% and 1.6%. Global Office Index Prime Rents, Rental Index (Q = 100) Asia Pacific Americas Europe GLOBAL Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 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 three regional indices Source: Jones Lang LaSalle, October 2012

3 3 Global Office Index, Q Slow rental growth in most Asia Pacific markets Modest rental movements were witnessed across major markets in Q3 2012, with either lower rental growth than Q2 or fairly small declines. Most markets saw quarterly uplifts of less than 3% as landlords took a less aggressive stance on asking rents. Of the 27 featured office markets, 14 saw an increase in net effective rents while 10 markets recorded decreases and three were static. Aggregate rental growth across the region averaged 0.5% quarteron-quarter, slowing from 1.0% in Q2 and below the post-global Financial Crisis (GFC) average quarterly growth of 1.4%. Beijing and Jakarta s CBDs continued to see the largest quarteron-quarter rental increases (between 5% and 8%) due to a lack of quality space. Average rents in the Shanghai CBD remained largely unchanged, although some landlords in Puxi have lowered rents slightly due to weak demand. On an annual basis, Beijing and Jakarta also saw the strongest rental growth across the region (30-35%). Rental declines remained moderate in Hong Kong (-2.2%) and Singapore (-1.2%) as any contraction in space requirements in both cities has been modest, following cumulative falls of about 13% since the market peak in late Effective rents in Tokyo saw a slight increase (2.3%) for the second straight quarter on the back of a low vacancy rate. Rents saw further declines in a few other Asian markets (e.g., Seoul, Ho Chi Minh City) due to subdued tenant demand or new supply. Average rents in India were flat or saw marginal growth. Effective rents fell in most Australian cities, generally by 1 to 2%. European office market recovery slowing further The pace of office market recovery in Europe continues to slow and is likely to pause in the short term. Latest surveys and economic data indicate that the Eurozone economy is still struggling, despite some recent encouraging policy developments including the European Central Bank s new plan for bond purchases, German support for the European Stability Mechanism and an increasing focus on banking integration and regulation. Uncertainty remains high, however, and concerns about Spain s debt issue remain evident alongside a similar apprehension for the situations in Greece, Italy and Portugal. Governments are continuing to drive austerity programmes and consequently the European labour market is not expected to show much recovery in the short term. Any renewed growth in demand for office space will therefore be delayed until the anticipated economic recovery filters through to job growth and expansionary demand. Over the quarter, prime office rents continued to soften in aggregate. The European Office Rent Index showed the third consecutive quarterly decline (-0.4% q-o-q and -0.5% y-o-y). Nevertheless, rents increased in Stockholm (+2.3%) and Munich (+1.7%) based on robust economic performance and a decreasing availability of high-quality space. Rents fell in Madrid (-2.0%), Milan (-1.9%) as well as in The Hague (-2.4%) and Utrecht (-2.3%), where the impact of the Eurozone debt crisis and austerity measures is weighing down on economic performance and the job markets. Prime rents also decreased in Paris (-1.9%). All other Index markets were unchanged on the previous quarter. Decelerating rental growth in the Americas The Americas Office Rent Index experienced moderate growth during Q as prime rents increased 0.6% quarter-on-quarter. This represents further deceleration from the 1.1% q-o-q pace registered in Q2 and is the slowest quarterly growth since Q Although the Americas Index now stands 8.5% above its post-gfc trough, the current level remains 6.8% lower than where it peaked just before the onset of the GFC in Although there are still wide variations in performance by each city within the region s Rent Index, one notable trend from the Q3 results is that the outperformers in the U.S. and Canada, mostly the technology-driven and energy sector markets, have seen rental growth slowing noticeably from earlier in Nevertheless, there still remain pockets of outperformance in the region, particularly in some of the dominant office centres in Latin America, where active development pipelines have thus far been met with ongoing resilient tenant demand. The strongest prime rental growth in the Americas in Q3 was recorded in Mexico City and Rio de Janeiro, with quarterly gains of 7.7% and 6.0% respectively. Mexico City s outperformance was mainly due to robust demand coupled with some postponement of near-term deliveries. Meanwhile, rents in Buenos Aires gained 3.1% q-o-q. In North America, many of the best performers in Q3 were again technology and energy-related centres, e.g. Denver (+3.2%), Seattle (+1.8%), Charlotte (+1.5%) and Austin (+1.2%). On a year-on-year basis, Mexico City saw the highest growth in the region of more than 26%, followed by San Francisco (+18.8%), São Paulo (+12.5%) and Silicon Valley (+10.5%).

4 4 Global Office Index, Q Global Office Index Prime Rents, Quarterly Movements Rental Change (% QoQ) Americas Europe -4.0 Asia Pacific Global Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q 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 three regional indices. Source: Jones Lang LaSalle, October 2012 Outlook for 2013 is still positive In overall terms, prime rental growth in 2013 is expected to remain positive, with the bulk of major markets projected to register singledigit rental growth over the next year. Among the larger markets, it is anticipated that Beijing and San Francisco will deliver the strongest rental performance. London, Tokyo, Moscow, Hong Kong and Sydney are also forecast to register above-average rental growth (5-10%). Madrid is predicted to experience the largest rental decline in 2013, while the two main LATAM markets São Paulo and Mexico City are expected to move into negative territory next year. In Asia Pacific, the office market in general continues to favour landlords, although corporate occupiers have become increasingly reluctant to pay high rents. We anticipate limited rental growth in most markets over the short term, while Hong Kong, Singapore and a few Australian cities should witness further moderate declines. On the whole, moderate rental growth is expected in 2013 with rents in Hong Kong and Singapore starting to recover in H and the strongest growth likely to be seen in markets such as Beijing and Jakarta. In Europe, rental growth in aggregate is expected to be flat at best for the remainder of the year - we forecast a slight 0.4% decline for the full-year For 2013, we project aggregate growth returning (+0.9%), driven by solid performances in the Nordic region, London as well as Germany and Russia. Rental growth will be supported by low levels of new supply, while in many markets, the continued scarcity of high-quality stock in CBD locations should further bolster prime rental levels. However, more pronounced rental growth is only expected when economic conditions show sustained recovery. The Americas Office Rent Index should see growth maintained through the end of 2012, but it is likely to be at the slower pace evident in Q3. There is still potential for growth to decelerate a little further, particularly through early 2013, as the concerns regarding near-term U.S. fiscal policy will probably spike at the outset of the new year. Momentum is also likely to ease in some Latin American cities as new inventory is delivered at the time when sluggish global and U.S. growth is prompting a temporary pullback in sentiment. However, by mid-year, short-term worries are likely to have subsided, and growth should start to pick up in line with generally improving economic fundamentals.

5 5 Global Office Index, Q Methodological 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 and American Regional Indexes that cover 90 office markets in total. They are weighted by real GDP (US dollar basis) for each region from IHS Global Insight. Weights are adjusted every four quarters. The latest weights are 34% - Europe; 30% - Asia Pacific; 36% - Americas. The European Index is calculated from the change in headline face rents for the highest-quality space in the premier office submarket in 24 European cities, weighted on the basis of the total office stock (all grades) in each city s overall market. The Asia Pacific 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 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 (D.C. 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).

6 6 Global Office Index, Q Jones Lang LaSalle Global Office Index Quarterly Rental Performance across 90 Cities Quarterly Change - Q vs Q Global 0.2% Europe -0.4% Asia Pacific 0.5% Americas 0.6% 1 Jakarta 8.1% 2 Mexico City 7.7% 3 Rio de Janeiro 6.0% 4 Beijing 5.1% 5 San Francisco 3.9% 6 Denver 3.2% 7 Buenos Aires 3.1% 8 Bangkok 2.5% 9 Stockholm 2.3% 9 Tokyo 2.3% 11 Bangalore 2.2% 12 São Paulo 2.1% 13 Seattle 1.8% 14 Munich 1.7% 15 Charlotte 1.5% 16 San Francisco Peninsula 1.4% 17 Chennai 1.3% 18 Austin 1.2% 19 San Diego 1.0% 20 Los Angeles 0.9% 21 Wellington 0.7% 22 Kuala Lumpur 0.6% 22 Oakland-East Bay 0.6% 22 Auckland 0.6% 22 New York 0.6% 26 Houston 0.5% 27 Calgary 0.4% 28 Manila 0.3% 29 Taipei 0.2% 29 Shanghai 0.2% 29 Phoenix 0.2% 32 Silicon Valley 0.1% 32 Adelaide 0.1% 32 New Jersey 0.1% 32 Boston 0.1% 32 St. Louis 0.1% 37 Bogota 0.0% 37 Osaka 0.0% 37 Amsterdam 0.0% 37 Barcelona 0.0% 37 Berlin 0.0% 37 Brussels 0.0% 37 Budapest 0.0% Quarterly Change - Q vs Q Dublin 0.0% 37 Düsseldorf 0.0% 37 Edinburgh 0.0% 37 Frankfurt 0.0% 37 Hamburg 0.0% 37 London 0.0% 37 Luxembourg 0.0% 37 Lyon 0.0% 37 Moscow 0.0% 37 Prague 0.0% 37 Rotterdam 0.0% 37 Warsaw 0.0% 37 Mumbai 0.0% 37 Delhi 0.0% 37 Miami 0.0% 37 Monterrey 0.0% 37 Santiago 0.0% 37 Washington, DC 0.0% 62 Tampa -0.1% 62 Perth 1-0.1% 64 Dallas -0.2% 65 Sydney -0.3% 66 Atlanta -0.4% 66 Philadelphia -0.4% 68 Ho Chi Minh City -0.5% 68 Chicago -0.5% 70 Canberra -0.8% 70 Portland -0.8% 72 Guangzhou -0.9% 73 Seoul -1.0% 74 Toronto -1.2% 74 Singapore -1.2% 74 Vancouver -1.2% 77 Baltimore -1.3% 77 Fairfield County -1.3% 79 Orlando -1.5% 80 Montreal -1.6% 81 Paris -1.9% 81 Milan -1.9% 81 Hanoi -1.9% 84 Madrid -2.0% 85 Hong Kong -2.2% 86 Utrecht -2.3% 87 The Hague -2.4% 87 Brisbane -2.4% 89 Melbourne -3.1% 90 Detroit -4.5%

7 7 Global Office Index, Q Annual Rental Performance across 90 Cities Annual Change - Q vs Q Global 2.0% Europe -0.5% Asia Pacific 2.7% Americas 3.8% 1 Jakarta 34.2% 2 Beijing 31.8% 3 Mexico City 26.3% 4 San Francisco 18.8% 5 São Paulo 12.5% 6 Perth 11.7% 7 Silicon Valley 10.5% 8 Bangalore 9.4% 9 Monterrey 9.1% 10 Chennai 8.3% 11 Santiago 7.6% 12 Rio de Janeiro 6.7% 13 Tampa 6.6% 13 New Jersey 6.6% 15 Seattle 6.5% 16 Düsseldorf 6.4% 17 Brisbane 6.2% 18 Denver 6.0% 19 Buenos Aires 5.9% 20 San Francisco Peninsula 5.8% 21 Austin 5.6% 22 Luxembourg 5.3% 23 Boston 5.2% 24 Sydney 5.1% 24 Bangkok 5.1% 26 Berlin 4.8% 26 Stockholm 4.8% 28 Shanghai 4.6% 28 New York 4.6% 30 Houston 4.3% 31 Adelaide 4.0% 32 Auckland 3.7% 33 Fairfield County 3.4% 34 Manila 3.3% 35 Vancouver 3.2% 36 Oakland-East Bay 3.0% 37 San Diego 2.7% 38 Portland 2.6% 38 Rotterdam 2.6% 40 Bogota 2.5% 41 Los Angeles 2.4% 42 Tokyo 2.3% 43 Hamburg 2.1% 44 Munich 1.7% 45 Dallas 1.6% Annual Change - Q vs Q Taipei 0.7% 47 Calgary 0.5% 47 Mumbai 0.5% 49 Charlotte 0.2% 50 Detroit 0.1% 51 Amsterdam 0.0% 51 Budapest 0.0% 51 Edinburgh 0.0% 51 Frankfurt 0.0% 51 London 0.0% 51 Lyon 0.0% 51 Moscow 0.0% 51 Prague 0.0% 51 Warsaw 0.0% 51 Delhi 0.0% 61 Guangzhou -0.1% 62 Phoenix -0.3% 63 Chicago -0.5% 64 Philadelphia -0.6% 65 Wellington -0.8% 66 St. Louis -0.9% 66 Washington, DC -0.9% 68 Toronto -1.0% 69 Kuala Lumpur -1.5% 69 Orlando -1.5% 69 Seoul -1.5% 72 Montreal -1.7% 73 Milan -1.9% 74 Canberra -2.0% 75 Miami -2.2% 75 Osaka -2.2% 77 Utrecht -2.3% 78 Baltimore -2.4% 79 Paris -3.0% 80 Barcelona -4.0% 81 Atlanta -4.1% 82 The Hague -4.7% 83 Brussels -5.0% 83 Melbourne -5.0% 85 Dublin -6.2% 86 Madrid -6.7% 87 Ho Chi Minh City -10.6% 88 Singapore -12.1% 89 Hong Kong -13.5% 90 Hanoi -16.8%

8 8 Global Office Index, Q About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of US$3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company s investment management business, is one of the world s largest and most diverse in real estate with more than US$47.7 billion of assets under management. For further information, please visit our website, 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 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.