22 March 2012

With the Eurozone debt crisis still looming in the horizon, global expectations for office market growth in 2012 have tapered to an almost stagnated steady growth stage, according to Colliers International’s Global Office Highlights 2H 2011. As a mild recession in early 2012 for the Eurozone may be unavoidable, some countries in the region may see negative absorption and increased vacancy. On the flip side, countries such as the United States, China and Australia are expected to experience positive absorption of office space due to aggressive business growth and expansion.

According to the research, the top three markets seeing the highest Class A net office rents in the world in the second half of 2011 were Hong Kong, London – West End and Paris. In Asia, Singapore, is not far behind with net office rents at US$65.81 per sq ft per year, earning it the 8th ranking worldwide.

Class A / Net Rent (US$ per sq ft per year) – Top 5 Cities


Dec 2011

June 2011

Dec 2010

Hong Kong




London – West End








Rio de Janeiro








Although the top three markets above maintained their position throughout 2011, all three markets saw declines in their rents between December and June 2011. The prime rents in London - West End and Paris were holding ground in local currency, but experienced a fall in terms of US dollar due to the weakening of the Euro and Pound Sterling compared to US dollar. For Hong Kong, however, office rent registered a drop in local currency, largely attributed to the continued weakening demand by the banking and financial sector.

“With Hong Kong being Asia’s financial hub, we expect the local office market to head towards a cyclical downturn considering the continued deterioration of business expansion plans and slowing hiring expectations,” said Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International. In terms of forecast, Lo expects rents in Central to fall 20% in the year in view of further rent affordability deterioration among financial tenants.

Meanwhile, the office vacancy decline in Asia was evident, with markets that saw a drop in vacancy in the second half of 2011 out-numbering those where vacancy increased by a two-to-one margin. Of the world’s most popular markets, those with the most significant declines in vacancy rate over the last six months in 2011 were nearly all in the Asia Pacific region. For example, Chengdu, driven by its booming manufacturing sector, recorded a falling vacancy rate by 7.8% in the second half of 2011. In Shanghai, vacancy rate declined by 3.2%.

In terms of office construction, several cities in Asia such as Guangzhou, China and Tokyo, Japan led the way with office construction of 19.6 million and 15.6 million sq ft, respectively, as of December 2011.

“Office rents are expected on the rise in most cities in Asia, but softening rents in Seoul and Hong Kong are a potential indicator of global economic uncertainty,” mentioned Lo. “In Tokyo, where new supply has been increasing for the past three years, we expect construction to peak and begin to decline in the coming year.”