Dublin will see an increase in activity in its office real estate market next year, according to Cushman and Wakefield’s Global Office Forecast.
In its latest report, the international commercial real estate company is predicting a slow recovery in the global office market through 2012 and 2013 with areas such as Dublin recovering quicker than others with the capital expected to have one of the highest growths in Europe over the next two years.
While 2011 began strongly in office markets around the world, apprehension and uncertainty led to a major bump in the road to recovery during the third quarter, resulting in a conservative outlook for the next year.
Although the forecast for growth has become more moderate, strong leasing fundamentals and limited supply will sustain global office markets, the majority of which have little or no new construction planned for either 2012 or 2013, it says.
In Europe, Frankfurt, Munich, Paris, Istanbul, Stockholm and London are expected to outpace other European markets.
While for the most part of 2011 the European office market moved steadily towards becoming a landlords’ market, recent economic instability has put occupiers back in the driving seat. However, the declining availability of high-quality space has made it clear that current conditions will support a delayed rather than a cancelled recovery.
Even while demand is weakening, businesses are still looking to improve productivity and cut costs. When it comes time to replace older space, consolidate, reorganize or achieve greater sustainability, tenants are faced with limited opportunities for high-quality space. This will ultimately drive rental growth in some markets, says the report.
Performance throughout Europe will vary by market. Overall vacancy is expected to see a modest fall, but some cities will see an increase due to lower demand or more development. While some areas, including Milan, Warsaw, Madrid and Stockholm, will see new building completions increase in 2012, overall development continues to drop throughout Europe.
“While the number of active occupiers is forecast to increase, most will be seeking improved efficiency rather than expansion and 2012 is widely expected to be a difficult year. The market will remain very polarized but most markets are expected to see absorption soften and then bounce back in 2013,” said David Hutchings, head of European Research for Cushman & Wakefield.
The highest net absorption relative to inventory will continue to be in Central European markets. Frankfurt will see a steady improvement and Budapest, Dublin, Madrid and Amsterdam will see increased relative activity.
Prime rents increased 3% in 2011 for major cities, but rental growth is expect to slow to less than 1% in 2011 before another increase sets in during 2013.
Paris, Istanbul, Dublin, Luxembourg, Munich and Stockholm will see the highest growth over the next two years, while Moscow is expected to perform well after 2012.
In 2013, 14 of 20 markets are forecast to see higher growth than in 2012.