Many regions would benefit from the 2015 global office market forecast.

 

Fundamentals are improving in many office markets across the Americas, Asia, and Europe, according to Cushman & Wakefield's latest 2015-2016 Global Office Market Study. doha property finder

"From a global perspective, 2014 was a better year for the office real estate industry, with many markets entering 2015 on stable footing," Maria T. Sicola, head of Cushman & Wakefield's Americas Research division, said. "Of course, certain markets in or near areas of political unrest and those with stagnant economic growth continue to struggle, but overall, things are better than they were a year ago."

THE AMERICAS AND THE UNITED STATES

U.S. cities are witnessing economic growth, well beyond those dominated by the robust technology and energy industries, which is translating into solid office business fundamentals. "Demand is increasing, especially for newly constructed or refurbished space," Sicola said. "While rental growth has slowed in some markets, more than 80% of the study's locations will see rent growth that outpaces inflation."

The changing workforce is a major driver of the office sector recovery in the United States. "The millennial generation is influencing where they want to live," Sicola said. "With strengthened fundamentals, Atlanta, Chicago, and Dallas have entered the ranks of San Francisco, Seattle, Boston, New York, and Houston in terms of leasing velocity."

The Canadian office industry is also showing signs of improvement. Strong demand is ushering in a new age of development in Toronto, with 5.1 million square feet of new space set to open by 2017. The Deloitte Tower will be built in Montreal, and new supply will be available in both Calgary and Vancouver. In most Canadian markets, consolidation and densification are the standard, while the flight to quality is causing vacancies in some older office stock.

Due in part to energy reforms and secondary laws passed by Congress, which have opened the country up to increased foreign investment, Mexico City has risen to become the star of the Latin American office market. Though GDP growth in 2014 fell short of estimates, robust growth is expected in the coming years.

South American markets, on the other hand, are lagging behind, especially in Argentina and Brazil, where both production and consumption have slowed. Although Chile's Santiago office market has been ahead of the curve, recent developments have brought it in line with other markets, which will not completely recover until 2017.

PACIFIC ASIA

In terms of economic growth and peace, Japan and India are among Asia's best performers. Strong corporate profits are driving office market demand in Tokyo, while information technology-related tenants continue to dominate the landscape in India. Singapore, like the Philippines, is benefiting from the tech boom because it is the next stop for multinationals after India.

Rental growth in developed markets will be highest in Tokyo and Singapore, as predicted, while many emerging markets will see above-average growth. Rents can rise moderately or remain stable across most of China.

"While the Asia Pacific markets' slow growth resulted in a subdued leasing climate in 2014, activity is expected to pick up next year," Sicola said. "With the exception of cities in Australia and some emerging markets in China and India, most core markets would have relatively low vacancies in 2015 and 2016."

UNITED KINGDOM

Although economic conditions in Europe are still mixed, a recovery is beginning to emerge. "The future looks better than it has in a long time," Sicola said. "Overall, leading indicators such as rental growth, supply levels, and demand are all positive."

Rental growth is expected in seventeen of the twenty-one cities studied. Dublin and London, the two front-runners, are experiencing supply-driven recoveries. Dublin is expected to expand at a compound annual rate of 5.7 percent from 2014 to 2016, despite only having one project in the pipeline. The construction pipeline in London will be constrained over the next two years due to below-average completions and pre-letting, which is absorbing potential supply.

With a few exceptions, Europe's Class A downtown office markets are expected to expand at a reasonable rate through 2016. However, given the pervasive patterns of densification and flight to efficiency, older office stock will pay the bill.