Global office leasing environment set to be competitive in 2016

Taylor Scott International News

The leasing environment in key global office markets is highly competitive with rents on prime spaces up by 3.6% year on year in the first quarter of 2016. This is despite heightened financial market volatility and global economic across the 95 major markets covered by the JLL Global Office Index which also shows that quarter on quarter rents increased by 0.6% compared to 1.3% in the fourth quarter of 2015. With the world’s major real estate markets appearing to be back on track following a cautious start to the year, business sentiment is improving and corporate activity is expected to ramp up over the course of 2016, according to the report. It suggests that leasing volumes are projected to broadly match those of 2015 and adds that there is some upside potential of up to 5% while strengthening global occupier demand through 2016 and tight supply will drive continued rental increases. Overall JLL forecasts prime rental growth of around 3% to 4% for the whole of 2016. A breakdown of the figures show that the Americas Index saw quarterly rental growth slow to 0.3% in the first quarter, down from 0.8% in the previous quarter. The report says that declines in Latin America and Canada weighed on relatively stronger gains in the United States. In Asia Pacific, quarterly rental growth decelerated to 0.6% from 1.1% in the fourth quarter of 2015 as overall growth was encumbered by lacklustre economic conditions in several tier one markets. Europe saw rental growth moderate to 0.6% quarter on quarter from 1.0% the final quarter of 2015 although general sentiment continued to be positive and no markets registered quarterly rental falls. The Middle East and North Africa Index rose by 2.7% during the first three months of 2016 but this was compared with the 7.4% in the previous quarter and rental growth was confined to Dubai while all other markets were stable over the quarter. While 2016 is expected to represent the peak of the global office development cycle, completion levels are still well below the previous peaks seen in 2001 and 2008, and the global vacancy rate is projected to remain generally stable over the rest of the year, the report explained. Office leasing volumes in Asia Pacific were up 7% year on year in the first quarter of 2016 and the region is expected to outperform with growth of 10% to 15% for the full year, supported by robust outsourcing markets and the sustained strength of domestic occupiers in China. Sydney is forecast to be the region’s top rental performer in 2016, while Singapore is likely to see further declines and economic uncertainty and supply pressures are anticipated to result in more moderate overall regional rental increases in 2016. In Europe, occupier leasing activity is anticipated to continue to hold up in 2016. The report says that most markets have joined the rental growth cycle, and a longer period of steadier rental growth… Taylor Scott International

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