This article is from the Australian Property Journal archive
ASIA is set to drive the global office development recovery, with the region expected to deliver two-thirds of projects completions by 2012, according to CB Richard Ellis.
Of the four major global regions — Asia, Western Europe, North America, and the Pacific – only Asia will witness significant growth in office completions in 2010 and 2011, before slowing to a still slightly higher-than-normal level in 2012.
Of the 27.2 million sqm of office space expected to be completed in the leading global office markets between 2010-2012, some 65%, or 17.7 million sqm, is set to come on stream in Asia, according to CBRE’s new report, entitled “Global Office Development Cycle: Where are we now?”.
Compared to 24%, or 6.4 million sqm is slated for completion in the business hubs of Western Europe; whereas 8%, or 2.1 million sqm will become available in North America and 4%, or 975,481 million sqm will be in the pipeline in the Pacific region.
CBRE global economist Raymond Torto said Asia is leading because the region, ex-Japan, is at a more advanced stage within their business cycle compared to North America and Western Europe, which is directly translating to higher rates of new construction relative to the norm over the past decade.
Office development completions between 2010 and 2012 calculated as a percent of year-end 2009 stock shows Asia accounted for 27.9%, after slowing down briefly in the wake of the global economic downturn.
In contrast the Pacific saw 7.3% and there were relatively scant completions in Western Europe (3.7%) and North America (1.2%).
Executive director of research Asia Andrew Ness said since the turn of the new millennium the world’s advanced economies have begun to lose their pre-eminent position of holding a majority share in the world’s market activity and the proportionate share held by the world’s emerging economies has soared.
“This fact has already begun to impact on how transnational companies position themselves globally, and how and where they place their key personnel and resources to enhance their competitive edge. Within Asia, this has also spurred the growth of indigenous corporate giants, who themselves aspire to achieve transnational status and have growing requirements for office space.
“This shift in corporate activity is reflected by the way in which the regional focus of office development has changed, especially since the global economy has begun to emerge from the financial downturn,” he added.
The report forecasts that the office development cycle in Asia is likely to be markedly different than that which will be witnessed in the other three regions. Approximately 17.7 million sqm of office space has already been completed or is scheduled to come on stream in Asia in 2010-2012, the equivalent of approximately 5.8 million sqm per annum.
This surge in development activity will push average completions during this period to a level about 50% higher than the average of 3.9 million sqm delivered per annum over the past nine years.
A series of shocks over the past three years, including the outbreak of the sub-prime crisis in 2007, the global economic downturn in 2008/2009 and the Eurozone debt crisis in spring 2010 led to many office developments in Western Europe being mothballed, as evidenced by the declining trajectory of completions forecast for the 2010-2012 period.
Western Europe will witness the completion of just 6.41 million sqm of new office supply within this timeframe, the equivalent of 2.13 million sqm per annum and a 30% drop over the average quantum of 3.05 million sqm per annum delivered over the past nine years.
North America, arguably the epicentre of the global economic downturn, will see only 2.14 million sqm of office space completed within the 2010-2012 period, or less than 743,224 million sqm per annum, a 70% drop compared with the average of 2.4 million sqm per annum recorded in the 2001-2009 period. The Pacific, whose office development cycle is buoyed by its strong economic links with Asia, will see 975,481 sqm, or about 325,160 sqm per annum, the equivalent of a milder drop of about 15% from the average of 380,902 sqm per annum recorded during 2001-2009.
In the Pacific, CBRE regional director of office services James Paterson said tenant pre-commitments have become the key ingredient for the commencement of major projects.
“With rents forecast to increase in some markets over the coming year, we may see higher levels of development in some CBD locations such as Melbourne and Sydney in 2012 and 2013, however this is unlikely to occur in all markets throughout the region.
“Developers are still bound by the cautiousness of the major lending institutions and the availability of development capital,” he concluded.
Australian Property Journal
