The global economic outlook for 2010 is more optimistic than last year and the world economy is expected to return to growth, according to CBRE’s report. This projected aggregate growth masks a varied pattern of recovery: the strongest growth is expected in Asia Pacific and the weakest in Europe.
Despite this, London remains at the forefront of recovery in global office rents. The City of London surpassed expectations for the 2009 year-end by registering prime rents at £43.50/sq ft/annum and rental growth of 3.5% in Q4 2009, defying forecasts that rents would remain stable.
Ray Torto, Global Chief Economist, CBRE, said: "In Hong Kong and the West End of London, prime rents are thought to have reached the bottom of the cycle at the end of 2009 and are expected to remain stable or start to grow over the next few quarters.
"Elsewhere across Europe and Asia, some markets continue to see rental falls, for example Paris and Singapore where rents
fell by 4% and 10% respectively in the quarter. However, we expect a general slowdown in rental declines as both occupier demand and vacancy rates start to show signs of stabilisation or even some improvement through 2010."
Major North American markets continue to lag behind European and Asian counterparts, with CBRE expecting significant rental falls in many cities in 2010 in the face of modest demand. Most notably, Toronto – where rents have fallen by 16% since June – is expected to see a decline in rents over the coming year, driven by increasing amounts of vacant space as tenants relocate to newer buildings.
The current tenants market should have resulted in higher leasing activity; but for the most part corporations are still waiting for further evidence of an economic recovery and have therefore delayed decisions.
"The gap is widening between global office markets as local supply and demand factors are influencing the strength and shape of recovery," Torto said.
"Positive economic signs will emerge in 2010 and lead to improved occupier stability. However, overall global prospects remain patchy at present.
"Demand for office space continues to lag the wider economy and many markets are likely to see further falls in employment before recovery firmly takes hold."
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