While economic uncertainty still affects the main commercial real estate centres around the world, overall global real estate markets are showing steady improvements, according to Jones Lang LaSalle (JLL) in their latest Global Office Index and Global Market Perspective reports.
The firm's Global Office Index showed prime office rents in 4Q2011 rising for the eighth consecutive quarter, up a further 0.8% over the previous quarter and representing a six% growth over the fourth quarter of 2010. Meanwhile, global vacancy is edging down to the lowest point for the past two years at 13.6%.
While commercial real estate expectations for 2012 have been tempered, barring significant financial system shocks, commercial real estate investment and leasing volumes are likely to be maintained at 2011 levels.
"The majority of global leasing markets are holding firm, and many are showing remarkable resilience especially among the BRIC countries, as well as robust showings from Canada, Australia, Germany and the Nordics," said Jeremy Kelly, director in JLL's Global Research team and author of the firm's Global Market Perspective in a recent statement.
"While leasing markets in the major financial centres are softening, the limited supply pipeline should ensure that they do not move significantly out of balance."
JLL's Global Office Index tracks the rental performance of prime office space across 81 major markets in the Americas, Asia Pacific and Europe. The Global Office Index for 4Q2011 also showed that rental growth rose the highest in the Americas at 1.2% in 4Q over 3Q as landlord leverage gradually increased in the majority of markets.
However, Asia Pacific markets have seen rental growth decelerating from 2.5% in third quarter to just 0.9% in fourth quarter as corporate demand began to slow. Despite the negative economic backdrop, Europe's office markets showed some improvement over the fourth quarter with growth picking up to 0.4% from a virtual halt in third quarter 2011.
The firm expects leasing volumes to be steady in 2012 with positive rental growth expected in most major office markets with Beijing, Toronto and San Francisco topping the charts with potential double-digit increases.
Investors, already wise to the resilient fundamentals in the commercial real estate sector, continue to choose real estate given attractive investment status compared with alternative investments.
The Global Market Perspective shows robust capital market investment volumes in 4Q2011. A total of US$411 billion (RM1.24 trillion) was transacted in 2011, 28% up on 2010. 2012 transaction levels are set to match 2011, with upside potential in the Americas, said the firm.
Arthur de Haast, lead director of the International Capital Group at Jones Lang LaSalle added: "The markets are witnessing a 'flight-to-quality', traditional in times of uncertainty, as investors pivot towards core assets in those major cities with strong economic fundamentals and/or with 'safe-haven' characteristics. While there is capital available for commercial real estate, debt financing around the global will be more constrained in 2012. We're seeing capital appreciation slowing as yields flatten, and spreads between core and secondary assets are widening."