HIGHLIGHTS GLOBAL OFFICE WWW.COLLIERS.COM SECOND HALF 2011 | OFFICE JAMES COOK Director oResearch | USA Global Oce Trend Forecast •Global oce vacancies will continue their decline, due to steady demand and low levels onew construction in North America and Europe. •The “ight to quality” trend will continue in many major markets, with occupiers trading up to higher-quality space or a better location as their leases expire. •The European sovereign debt crisis will likely push the Eurozone into a mild recession in early 2012. This contraction will be elt most prooundly in a handul ocommercial property markets within the most troubled nations. Economic prospects in the Eurozone have slightly reduced overall positive global expectations or market perormance in 2012. We expect continuing modest demand or oce space, with most cities seeing a drop in vacancy rates. But global averages do not speak to the nuances oindividual markets, and—while we expect positive absorption due to business growth and expansion in the United States, China and Australia—some Eurozone countries may see negative absorption and increased vacancy as the region enters a mild recession. Global Ofce Demand Growth Slow and Steady GLOBAL CAPITALIZATION RATES / PRIME YIELDS: 10 LOWEST CITIES MARKET (Ranked by Dec ) DEC 2011 JUNE 2011 DEC 2010 Taipei 2.60 2.80 2.90 Hong Kong 2.94 3.22 3.31 Vienna 3.50 3.50 3.50 London – West End 4.00 4.00 4.50 Zurich 4.10 4.10 4.10 Singapore 4.20 4.30 4.20 Geneva 4.25 4.00 4.00 Paris 4.50 4.50 4.75 Munich 4.50 4.50 4.50 Tokyo 4.50 4.60 4.70 GLOBAL OFFICE OCCUPANCY COSTS: TOP 10 CITIES MARKET (Ranked by Dec ) DEC 2011 JUNE 2011 DEC 2010 Hong Kong 178.34 185.91 166.62 London – West End 120.31 124.50 108.28 Paris 90.26 101.13 92.31 Rio de Janeiro 78.98 85.70 79.89 Moscow 75.78 64.86 77.54 London – City 75.29 77.91 75.02 Perth 68.73 69.76 55.29 Singapore 65.81 69.21 57.80 Geneva 65.31 72.83 64.20 São Paulo 63.43 71.42 60.71 CBD CAP RATE (%) Latin America Boasts the Tightest Oce Markets Some othe world’s lowest oce vacancy rates are ound in Latin American cities. Santiago, Chile; Rio de Janeiro, Brazil; São Paulo, Brazil; and Lima, Peru all have vacancy rates below three percent, resulting in a market that strongly avors landlords, prompts new construction and might squeeze some tenants that desire to expand. For the most part, we expect the strength othese markets to persist. While decreases in European demand or its commodities will likely hurt Latin America, this will be tempered by continued demand rom China. In São Paolo, heightened demand has spurred the highest rates onew development in the region, which will eventually put downward pressure on asking rents. Select Asia Pacic Markets See Big Vacancy Drops The global trend in dropping vacancy rates should be evi- dent in Asia and continue through 2012. Markets that saw a drop in vacancy in the second halo2011 outnumbered by a two-to-one margin those where vacancy increased. Othe world’s most populous markets, those with the most signifcant declines in six-month vacancy rates were nearly all in th e Asia Pacifc region. Chengdu, propell ed by its strong manuacturing sector, saw its vacancy rate drop by 7.8 percent in the period, and Shanghai saw a 3.2 percent drop in vacancy. Two other large Asian markets saw vacancy rates drop by 1.5 percent or more: Jakarta, which has also seen sustained growth in CBD rental rates and renewed global investor interest; and Singapore, where occupancies are expected to stabilize. Marquee Markets See Rent Decline While Hong Kong, London’s West End and Paris command the top three highest asking rents or Class A oce space, each has shown apparent decline in rents between June and December o2011, when quoted in U.S. dollars. Substantial declines, in act: led by a $10.87 USD drop in Parisian Class A rents. But how signifcant are these fgures? The change in London and Paris rents is due to the strengthening dollar relative to the euro and pound sterling. In local currency, prime rents in these markets are holding ground. Although smaller, the decli ne in Hong Kong o$7.56 USD ($5.10 HKD) per square oot may be a more important indicator othings to come, as demand rom the banking and fnancial sector continue to weaken. EMEA and Asia Pacic Lead Global Construction A signifcant percentage othe oce space under construction is in Europe, the Middle East and Arica (EMEA), and much othat is occurring in Moscow and Dubai. While both othese markets should expect strong economic growth in 2012, the act that Dubai—with a vacancy rate o50 percent—is constructing at such a pace leads us to expect that supply will continue to outpace demand in that market. The other two top markets or oce construction are in the Asia Pacifc region. Guangzhou—China’s leading commercial port city—and Tokyo have 19.6 and 15.6 million square eet under construction respectively. Asian economic growth rates will remain strong in the coming months, with China and India leading the pack. Rents are on the rise in most cities in the region. However, dropping rents in Seoul and Hong Kong are a potential indicator oglobal economic uncertainty. In Tokyo, where new supply has been increasing or the past three years, we expect construction to peak and begin to decline in the coming year. CLASS A / NET RENT (USD/SQ FT)
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•Global oce vacancies will continue their decline, due to steady demand and low levels o new construction in NorthAmerica and Europe.
•The “ight to quality” trend will continue in many major markets, with occupiers trading up to higher-quality space orbetter location as their leases expire.
•The European sovereign debt crisis will likely push the Eurozone into a mild recession in early 2012. This contractionwill be elt most prooundly in a handul o commercial property markets within the most troubled nations.
Economic prospects in the Eurozone have slightly reduced overall positive global expectations or market perormance2012. We expect continuing modest demand or oce space, with most cities seeing a drop in vacancy rates. But gloaverages do not speak to the nuances o individual markets, and—while we expect positive absorption due to busingrowth and expansion in the United States, China and Australia—some Eurozone countries may see negative absorptand increased vacancy as the region enters a mild recession.
Global Ofce Demand GrowthSlow and Steady
GLOBAL CAPITALIZATION RATES /PRIME YIELDS: 10 LOWEST CITIES
MARKET(Ranked byDec )
DEC2011
JUNE2011
DEC2010
Taipei 2.60 2.80 2.90
Hong Kong 2.94 3.22 3.31
Vienna 3.50 3.50 3.50
London – West End 4.00 4.00 4.50
Zurich 4.10 4.10 4.10
Singapore 4.20 4.30 4.20
Geneva 4.25 4.00 4.00
Paris 4.50 4.50 4.75
Munich 4.50 4.50 4.50
Tokyo 4.50 4.60 4.70
GLOBAL OFFICE OCCUPANCY COSTS:TOP 10 CITIES
MARKET
(Ranked byDec ) DEC2011 JUNE2011 DEC2010
Hong Kong 178.34 185.91 166.62
London – West End 120.31 124.50 108.28
Paris 90.26 101.13 92.31
Rio de Janeiro 78.98 85.70 79.89
Moscow 75.78 64.86 77.54
London – City 75.29 77.91 75.02
Perth 68.73 69.76 55.29
Singapore 65.81 69.21 57.80
Geneva 65.31 72.83 64.20
São Paulo 63.43 71.42 60.71
CBD CAP RATE (%)
Latin America Boasts the Tightest Oce MarketsSome o the world’s lowest oce vacancy rates are oundin Latin American cities. Santiago, Chile; Rio de Janeiro,
Brazil; São Paulo, Brazil; and Lima, Peru all have vacancyrates below three percent, resulting in a market thatstrongly avors landlords, prompts new construction andmight squeeze some tenants that desire to expand. For themost part, we expect the strength o these markets topersist. While decreases in European demand or itscommodities will likely hurt Latin America, this will betempered by continued demand rom China. In São Paolo,heightened demand has spurred the highest rates o newdevelopment in the region, which will eventually putdownward pressure on asking rents.
Select Asia Pacic Markets See Big Vacancy DropsThe global trend in dropping vacancy rates should be evi-dent in Asia and continue through 2012. Markets that sawa drop in vacancy in the second hal o 2011 outnumberedby a two-to-one margin those where vacancy increased.
O the world’s most populous markets, those with the mostsignifcant declines in six-month vacancy rates were nearlyall in the Asia Pacifc region. Chengdu, propelled by itsstrong manuacturing sector, saw its vacancy rate drop by7.8 percent in the period, and Shanghai saw a 3.2 percentdrop in vacancy.
Two other large Asian markets saw vacancy rates drop by1.5 percent or more: Jakarta, which has also seensustained growth in CBD rental rates and renewed globalinvestor interest; and Singapore, where occupancies areexpected to stabilize.
Marquee Markets See Rent DeclineWhile Hong Kong, London’s West End and Paris commandthe top three highest asking rents or Class A oce space,
each has shown apparent decline in rents between Jand December o 2011, when quoted in U.S. dollSubstantial declines, in act: led by a $10.87 USD drop
Parisian Class A rents.
But how signifcant are these fgures? The changeLondon and Paris rents is due to the strengthening dorelative to the euro and pound sterling. In local currenprime rents in these markets are holding ground. Althosmaller, the decline in Hong Kong o $7.56 USD ($5.10 Hper square oot may be a more important indicator o thito come, as demand rom the banking and fnancial seccontinue to weaken.
EMEA and Asia Pacic Lead Global ConstructionA signifcant percentage o the oce space unconstruction is in Europe, the Middle East and A(EMEA), and much o that is occurring in Moscow Dubai. While both o these markets should expect streconomic growth in 2012, the act that Dubai—withvacancy rate o 50 percent—is constructing at such a pleads us to expect that supply will continue to outpdemand in that market.
The other two top markets or oce construction are in Asia Pacifc region. Guangzhou—China’s leadcommercial port city—and Tokyo have 19.6 and 15.6 milsquare eet under construction respectively. Asian econogrowth rates will remain strong in the coming months, wChina and India leading the pack. Rents are on the rismost cities in the region. However, dropping rents in Seand Hong Kong are a potential indicator o global econouncertainty. In Tokyo, where new supply has been increasor the past three years, we expect construction to peak abegin to decline in the coming year.
CLASS A / NET RENT (USD/SQ FT)
7/31/2019 Global Office Highlights 2nd Half 2011
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HIGHLIGHTS | SECOND HALF 2011 | OFFICE | GLOBAL
LOCAL MEASURE / CURRENCY CBD RENTS
MARKET COUNTRY UNITQUOTED
CURRENCYTIME
PERIOD
EXCHANGERATE (USD)DEC 31, 2011
AVERAGECLASS ANET RENT
AVERAGECLASS A
GROSS RENT
AVERAGECLASS ANET RENT
AVERAGECLASS AGROSSRENT
CBD CAPRATE
/ PRIMEYIELD (%
ASIA PACIFIC
Adelaide Australia SM AUD Year 0.98 350.00 460.00 33.18 43.61 7.6
Brisbane Australia SM AUD Year 0.98 615.00 745.00 58.30 70.62 7.5
Canberra Australia SM AUD Year 0.98 367.00 445.00 34.79 42.19 9.9
Melbourne Australia SM AUD Year 0.98 498.00 613.00 47.21 58.11 7.0
Perth Australia SM AUD Year 0.98 725.00 880.00 68.73 83.42 8.0
Sydney Australia SM AUD Year 0.98 631.00 762.00 59.82 72.24 6.9
Chengdu China SM CNY Month 6.29 143.76 162.51 25.45 28.77 7.2
Guangzhou China SM CNY Month 6.29 158.82 215.80 28.12 38.21 6.2
Hong Kong China SF HKD Month 7.77 115.45 133.39 178.34 206.06 2.9
Shanghai China SM CNY Month 6.29 249.89 249.89 44.27 44.27 6.1
Bangalore India SF INR Month 53.06 55.00 65.00 12.44 14.70 9.9
Chennai India SF INR Month 53.06 60.00 70.00 13.57 15.83 10.0
Delhi India SF INR Month 53.06 222.00 261.00 50.21 59.03 9.0
Mumbai India SF INR Month 53.06 191.00 225.00 43.20 50.89 10.5
Jakarta Indonesia SM IDR Month 9,070.00 132,753.00 188,164.00 16.31 23.12 8.1
Tokyo Japan SM JPY Year 77.12 91,476.00 110.17 4.5
Auckland New Zealand SM NZD Year 1.29 307.00 434.00 22.17 31.34 8.6
Wellington New Zealand SM NZD Year 1.29 343.00 439.00 24.77 31.70 8.3
Makati Philippines SM PHP Month 43.80 850.00 21.63 9.4
Class A Gross Rent – The average rent quoted persquare oot per annum or Class A oce building withinthe CBD plus additional costs such as property taxes,service charges or operating expenses.
Class A Net Rent – The average rent quoted per squareoot per annum or a Class A oce building within the
CBD.Class A (Prime) Buildings – Most prestigious buildingcompeting or premier oce users with rents aboveaverage or the area. Buildings have high qualitystandard or nishes, state-o-the-art systems,exceptional accessibility and a denite market presence.
Characterized by: Prime central locations; rst-classtenant improvements; on-site parking; state o the artelevators and HVAC systems; concrete and steelconstruction; contemporary design and architecture;high quality o upkeep and maintenance; ability tocommand a premium rent within the relevant market.The Class A building designation implies that the size othe building is “signicant” in accordance with themarket.
Quoted Currency – The currency quoted locally in alllease transactions. Not necessarily national currency.(Note: Chile utilizes Unidad de Fomento, which equalsUSD .)
rom sources deemed reliable. While every reasonable
efort has been made to ensure its accuracy, we cann
guarantee it. No responsibility is assumed or any
inaccuracies. Readers are encouraged to consult their
proessional advisors prior to acting on any o the
material contained in this report.
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Time Period – The standard way in which leases arequoted. Usually on a per month or per year basis.
Existing Inventory – Existing oce oor space (ClassesA, B and C) within each city’s CBD (central businessdistrict).
Under Construction – The total oce oor space
(Classes A, B and C) within each city’s CBD (centralbusiness district) which is under construction, but notyet completed, giving an indication o the developmentpipeline or each market. This includes both availableand pre-let oor space.
Unit – The normal convention locally in which area ismeasured. Usually on a per square oot or per squaremeter basis.
Vacancy Rate (%) – The percentage o the inventory(total completed oce oor space, Classes A, B and C,within the CBD) which is unoccupied.
Yield (%) – The average prime yield (or capitalizationrate), expressed as a percentage, or a Class A ocebuilding within the CBD.
Note: SF = square eetSM = square meter
PSF = per square oot
PSM = per square meterCBD = central business district