_Global Occupier Dashboard – Q1 2017
Despite the current geopolitical climate, occupier activity remained firm across major global office markets, with markets including Washington DC, Dallas, Phoenix, Paris, Munich, Milan, Warsaw, Shanghai and Melbourne making a strong start to the year. Knight Frank’s latest Global Occupier Dashboard shows that across major global office markets, the balance of power is generally more towards the occupier, but with some marked divergences among the regions.
In North & South American office markets, the market balance is highly variable. Tightening labour market conditions are hampering occupier expansion, with absorption subdued across many US markets in Q1 2017. Although the tech sector is continuing to drive occupier activity, there has been evidence of cooling activity, particularly in the Bay Area of Silicon Valley and San Francisco, as technology tenants exercise caution. Next year will see a shift, with some markets becoming balanced, such as São Paulo and Buenos Aires, as they slowly emerge from recession.
In Europe, there is a clear divide in the balance of power, with diminishing supply in western Tier-1 markets including Paris, Berlin, Munich and Dublin shifting the balance of power firmly to the landlord. In contrast, softer market conditions in Central & Eastern European markets are creating more tenant favourable conditions. In particular, both Warsaw and Bucharest are benefiting from an unprecedented phase of business restructuring and associated business process outsourcing, with international occupiers moving their operations to these markets in order to deliver processes at lower costs. This has been a catalyst for significant development activity placing downward pressure on rents. The outlook is set to remain largely unchanged in 2018.
In Asia-Pacific, conditions are more challenging for occupiers with markets more biased toward the landlord. For example, Bangkok witnessed the highest rental growth rate in the Asia-Pacific markets due to strong absorption amidst tight supply. Similarly in Hong Kong, office demand has been resilient driven by mainland Chinese firms and this has led to aggressive pricing by landlords. Next year will bring some improvements to tenants. Significant supply deliveries in Tokyo will place downward pressure on rents.
In MENA, volatility in oil prices and global economic uncertainties has weakened real estate market performance and created tenant favourable conditions. As tenants have become increasingly cost sensitive and have looked at renewing their leases or consolidating their operations rather than expansionary activity. In response, landlords are offering greater incentives and more flexibility in lease terms and this trend is expected to continue into 2018.
Read the latest Global Occupier Market Dashboard 2017
Read the latest European Occupier Market Dashboard 2017