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Russian bear shows its teeth in global office market
16 Feb, 2012, London
Cushman & Wakefield report shows shortage of quality space is driving office rents
Russia's capital Moscow experienced a steep increase in prime office rents in 2011, making it the fastest-growing location in Europe, according to Cushman & Wakefield's Office Space Across the World 2012 report. A lack of construction activity caused by economic uncertainty has seen supply levels ease in Moscow and in a growing number of markets across the globe.
"From a broad global perspective, rental rate growth has been driven primarily by modest economic improvements in an environment of limited new supply," said Glenn Rufrano, President and Chief Executive Officer of Cushman & Wakefield.
For the fastest-growing markets, demand also improved. A rental uplift of 41% in Moscow made it the second fastest-growing city in the world - in terms of prime office rents - behind Beijing which saw a 75% jump. It also resulted in the city taking fourth position in the top 10 most expensive office locations in the world ranking, up from seventh position last year.
Mark Pollitt, Head of Moscow Office Agency at Cushman & Wakefield, said, "The outlook for 2012 remains positive, following a strong close to a number of deals in Q4 2011. Demand is driven from Russian businesses, especially from the IT and Telecoms sectors, making strategic expansion and consolidation decisions. Demand for the most expensive prime buildings could be more subdued this year with a possible delay in decision-making for international companies."
Magnus Lange, Managing Partner - Stockholm, Cushman & Wakefield, commented, "The
most important factor behind the rental growth in the Nordic markets is the strength of the
general business climate. Companies in the most office-intensive sectors, such as banks, law
firms and accounting companies, are profitable and expanding. In central Stockholm, a low level
of new construction in recent years has limited the availability of modern space in the inner
city, which has also played a key role driving rents."
James Meikle, Head of Office Space Milan at Cushman & Wakefield in 2011, said, "Despite continued economic and political uncertainty in Italy, the Milan leasing market for Grade A space performed relatively well during 2011. This was mainly driven by a relatively high number of larger (>5,000 sqm) transactions, where corporations have taken new space; usually as part of a larger consolidation or rationalisation exercise. Incentive packages on offer, especially to the larger tenants, increased. We see this trend continuing during 2012 although it should be noted that the gap between prime and secondary space is widening with poorer quality assets finding it increasingly difficult to attract the limited demand."
Mariana Mokayad Hanania, Manager Research Services, Cushman & Wakefield South America, said: "2011 marked another good year for the Brazilian real estate market. Robust and growing demand, together with insufficient supply, have driven up asking leases, which in some areas reached historical highs."
Barrie David of the European Research Group said, "Recovery has stalled but has not been derailed by economic turbulence. Owing to the supply situation, the second half of the year should see an increase in location decisions being made. In the short term, parts of North America may recover quickly, but the ?Gateway Cities? across the world will remain in an undersupplied position."