According to "Global Office Forecast" published by Cushman & Wakefield, the global office markets are currently experiencing a great boom. What are the predictions for the upcoming years?
At present, there are 214 million sq. m of modern office space under construction on the global office markets, which will be delivered by the end of 2019. This is exactly the value of existing office resources in the following five large cities: Washington, Dallas, London, Singapore and Shanghai. First and foremost, this peculiar boom can be observed in the Asia-Pacific Region with the new supply which is mainly concentrated in Beijing, Shenzhen, Shanghai, Manila and Bangalore. It corresponds to 55 per cent of total space under construction.
Reputedly, if the demand is to maintain a high level, such big supply of modern office space will cause an increase in the vacancy rate. So, the question is: Are we actually building too many offices?
The global demand will amount to ca. 160 million sq. m by the end of 2019. There will be also ca. 214 million sq. m of new areas more in the same period, thus the vacancy rate can increase on many markets. In Europe, however, this relation between supply and demand is quite sustainable. We can observe a lot of changes occurring on the map of popular office locations in the world. The increase in employment in many existing locations will still be supported by increased population as well as migration. There is already a trend which consists in searching for alternative office centers with a stable position and the so called technopoles, which results from decreased accessibility to qualified employees. The market favors locations which offer beneficial conditions on the labor market. We can estimate that the global economy will create 9.9 million net work places in office buildings in the next 3 years.
Furthermore, there is a natural exchange of resources whereas tenants are stricker when it comes to offered space and work environment; they prefer new office buildings of high class which meet their increasing expectations. For instance, taking the last five years into consideration, new office space constitutes 65 per cent of the total net absorption in the United States.
What factors favor increase in supply of office space?
The recipe for the perfect development conditions on the office market in our sector is combination of accelerated economic growth and low interest rates. The supply corresponds to the envisaged demand for space.
Where can we expect the biggest increase in developers’ activity in the world?
The greatest increase in developers’ activity can be mainly expected on the following office markets: Beijing, Shenzhen and Shanghai. When it comes to Europe, it will be London and Paris, as usual, and such cities as Brussels, Berlin or Munich, which are characterized by low availability of space and high demand for modern office areas.