Global office-rent market recovery 'delayed'

Compared with year-end 2010, the indices measured increases of 5 per cent for Global Rent and 8.2 per cent for Global Capital, reflecting stronger growth in the first half of 2011. 

“After a good start in 2011, global office rental rates and capital value recoveries were delayed in the fourth quarter by the dominant global macro-economic issues,” said Raymond Torto, CBRE global chief economist. “We believe the recoveries in commercial real estate are only delayed not denied, as new construction pipelines are sparse except in a select number of markets.” 

The uncertain global economic backdrop continued to contribute to occupier and investor caution, thus diminishing the strength of the global office commercial real estate recovery. While both global indices continued to edge upward slightly, the quarterly growth rates were notably below the rates previously seen in the first half of 2011. 

For example, since the CBRE Global Office Rent Index began increasing in the second quarter of 2010; the average quarterly growth rate through the third quarter of 2011 was 1.2 per cent. 

Similarly, the CBRE Global Office Capital Value Index reached bottom in the fourth quarter of 2009, and its quarterly average growth rate through the third quarter of 2011 was 2.2 per cent. 

Both the Global Capital Value Index and Global Rent Index are 10 per cent below their pre-recession peaks. 

The research added that thanks to slight gains in the office-using employment sector in the US, a moderate resurgence in demand has gradually reinvigorated the Americas Rent Index, which increased 0.95 per cent this quarter, making this the strongest quarterly gain for all three global regions. However, for the Americas Index to return to pre-recession rent levels, employment across all economic sectors must noticeably improve. 

While the Asia-Pacific Rent Index rose 2.8 per cent on average over the past six quarters, it edged up only 0.27 per cent in the fourth quarter of 2011. Despite having experienced the relatively strongest rental recovery, the region currently stands the farthest below its pre-recession peak. 

Meanwhile, CBRE Global Capital Value Index Regional Breakdown from the second quarter, 2010 through the second quarter of 2011, the Asia-Pacific region was responsible for boosting the Global Capital Value Index and led all three global regions with the highest quarterly growth rates. This quarter, however, the Americas Capital Value Index contributed most strongly with a 2-per-cent quarterly increase, while Asia-Pacific and Europe, Middle East and Africa saw quarterly declines of 0.6 per cent and 0.04 per cent, respectively. 

However, the Americas index level remains the lowest of all regions relative to its pre-recession levels. 

In contrast, having undergone the largest recovery from its trough, Asia-Pacific’s current index level is only 0.7 per cent below its pre-recession peak level, even despite tempered growth over the past two quarters. 

The CBRE Indices were created by CBRE Research. The Global Office Rent Index is comprised of data from 123 cities around the world. The Global Capital Value Index uses the same sample for EMEA and Asia-Pacific, while the Americas data is derived from the National Council of Real Estate Investment Fiduciaries and is not built up city by city the same way as the rent index data. The base period for the indices is the first quarter of 2001.