Going for gold in the global office market

21 Aug, 2012, Warsaw

“Beijing wins an impressive 5 out of 6 possible “gold medals” and tops the table for performance among the leading 100 global city office markets” according to a new research report released today by Cushman & Wakefield.

The report looks at how global office markets have been performing and awards medals for the fastest growth, the strongest rental or yield recovery since the last global downturn and for which can sustain the highest rents and capital values. Highlights include:

• San Francisco ranks second behind Beijing with rental values buoyed by strong demand from its tech driven economy. By contrast Moscow lies in third place, with commodity strength aiding its recovery.
• London takes fourth place on a par with Shanghai on the back of a strong upturn in rents and capital values as well as the focus of being host Olympic city.
• Asia was the top performing region overall, winning more medals and more golds than the Americas in second place and EMEA in third.
• Overall Europe lags behind due to a slower recovery compared to other global regions as the sovereign debt crisis weighs on business decision making.

According to Glenn Rufrano, Global President & CEO Cushman & Wakefield, “Major international sporting events are an opportunity for the host city to show off on the global stage and London has done just that – with its office market claiming a podium finish in our analysis. However what’s interesting about this research is the truly global nature of the winners’ table – with mature markets like San Francisco and Hong Kong in the mix but Beijing on top and other emerging markets such as Moscow, New Delhi and Sao Paulo right up there - and it’s not as simple as saying the so-called “emerging” markets are seeing the growth and the “mature” markets have the highest values. We are seeing a real mixing of demand and activity which means we have a truly global market in which these old labels are being left behind.”

The Americas was the leading region for “fastest” value growth in the past year based on rent and yield adjustments. North America was ahead for yield compression, with US and Canadian cities taking 6 out of the top ten spots. Latin America out-performed on rental growth however, with Sao Paulo, Bogota and Lima in the top 10 for rental growth alone.

Jim Underhill, CEO America’s Cushman & Wakefield said;"The Americas enjoy their leading gold medal status driven by "faster" performance in rent and yield growth over the last year. The US and Canada lead with

respect to yield compression while Latin America prevails in the rent growth category. New York tops the leader board for high capital values driven by global investment and occupier demand but San Francisco shines as the current star performer thanks to demand from technology firms which has fuelled strong rental growth."

Asia came out top for the highest rents and capital values sustained, with 5 out of the top 10 global markets. London and New York secured places high up on list whilst Paris, Zurich and Geneva round out the top ten. Despite Beijing taking the overall top spot for performance, it was beaten by Tokyo and Hong Kong as the most expensive by rent and by Taipei and Hong Kong as the most expensive by yield.

Asia again stands out as the stronger market when it comes to the recovery seen since the end of the great recession, with aggregate office rental values up over 15% since 2009, led by mainland China followed by Hong Kong, Indonesia and Singapore.

Sanjay Verma, CEO Asia, Cushman & Wakefield, said; Asia’s “stronger” performance attests to the region’s resilient economic landscape that spurred broad-based improvements in the office sector last year which have continued into 2012. The growing clout of the region’s growth markets can be seen in the above-average performance of a number of major markets led by Beijing, Shanghai and New Delhi.

Of course, the region has not been immune to the recent worsening in the economic environment, with a few strongholds such as Hong Kong losing steam this year, but while some vulnerabilities exist across Asia, it would appear the economy as a whole will remain on a growth path that should still be sufficient to underpin gradual, steady progress in office fundamentals in most markets across the region.”

Europe has seen the weakest recovery with only London and Moscow achieving gold medals. Certain Nordic markets have also recovered well, led by Oslo, while the leading German cities as well as Paris have seen yields correct even if rents are yet to stage a strong bounce.

According to Carlo Barel di Sant’Albano, Chairman of the Board and CEO EMEA, Cushman & Wakefield, “London may see a lasting change after the Olympics as the east of the city grows and develops. However while other cities have by and large not seen the recent growth of London, a lot of European markets are well placed in the global league table and notwithstanding the ongoing sovereign debt crisis, we can expect a steady build up in demand and activity across the region’s established cities as well as the continued development of new competitors, led by Moscow, Warsaw and Istanbul.”

According to David Hutchings, head of EMEA Research and author of the report, “Performance has slowed in general as uncertainty has increased in most areas of the global economy in recent months but we still have an international office market where occupiers are needing to seek out better space and locations to help them compete, work better and meet their sustainability targets. With the cost of that space only likely to increase as supply levels fall, any pause in the market as decision making slows is an opportunity for winning businesses to take advantage and steal a march on their competitors – and that’s what we’re starting to see in some areas. As in sport, the most successful businesses are not always the fastest but they are likely to be the boldest and the best prepared!”

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