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Office markets survived the challenges

Staff writer ▼ | June 5, 2013
Office markets around the world have survived the challenges of a slowing Chinese economy, a mixed American recovery, and European mixed economies, according to Colliers International.
Office markets
Office marketsOffice markets around the world have survived the challenges of a slowing Chinese economy, a mixed American recovery, and European mixed economies, according to Colliers International.


Global markets are aiming for a state of economic equilibrium between supply and demand after weathering challenges in China, the U.S. and Europe. While some markets appear to still be lagging, the majority are experiencing more stability than they have in some time.

"Office markets around the world have survived the challenges of a slowing Chinese economy, a mixed American recovery, and a European market that is still finding its economic footing," said James Cook, Director of Research at Colliers International. "Now, for the first time in several years, we're experiencing balance on a global level."

In the United States and Canada strength in the ICEE (intellectual capital, energy and education) markets will remain the primary driver of office-using employment growth through this year, with the vacancy rate improving to nearly 14 percent in the first quarter of 2013, dropping for the fifth consecutive quarter.

Meanwhile a strong rebound in the for-sale housing market is poised to benefit U.S. suburban office markets in 2013 a variety of service providers open offices and resume hiring to cater to new developments, particularly in hard-hit markets like Phoenix, Las Vegas and parts of Florida.

Office development in Mexico City is strong, with 20 new buildings developed in 2012, 54 more under construction in the first quarter of 2013, and a 17 percent increase in absorption. In the next five years, Mexico City's office inventory is expected to increase by about 3.2 million square feet, but with a stable vacancy rate, the market should have enough absorption to fill the new properties.

While demand for Class A space in Beijing decreased in the second half of 2012 and absorption also decreased significantly, overall rental rates still grew by nearly 20 percent. Demand is expected to remain largely stable for the remainder of 2013. Sydney and Melbourne: Domestic investment has doubled since 2011, now making up 78 percent, and is expected to remain strong.

In Melbourne, a lack of business confidence has led to a slowdown in demand and tenant commitment. However, Colliers experts expect certainty to return to the market and drive demand in 2014.

Office absorption in Mumbai rose through 2012 despite occupier caution, with demand driven by the banking, financial services, insurance and IT industries. Colliers expects healthy demand to continue in 2013 with The Andheri, BKC, and Lower Parel submarkets the preferred destination due to availability of Class A space.

While the threat of a Eurozone break-up has diminished, the European office market continues to operate at a slow pace, with pockets of rental growth in parts of Northern Europe like Germany and the Nordics, and rental weakness across most of Southern Europe and some fringe Central and Eastern markets. In Germany, occupier demand began rising in the first quarter of 2013, while demand in Paris is expected to stabilize this year.


 

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