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News release

Perth records the 5th strongest annual rental increase across 81 global markets monitored in Jones Lang LaSalle’s Global Office Index for Q3/2011

The Index shows Q3 was the seventh consecutive quarter that prime rents have risen globally, reflecting an 8.2% uplift since the bottom of the market in Q4/2009

AUSTRALIA, 16 NOVEMBER 2011 – Despite corporations delaying real estate decisions and facing renewed pressure to drive down costs in the face of economic volatility in Europe and the United States, prime office rents across 81 global markets increased by a further 1.1 percent during third quarter (Q3)2011, according to the Jones Lang LaSalle Global Office Index.
The Index shows this was the seventh consecutive quarter that prime rents have risen globally, reflecting an 8.2 percent uplift since the bottom of the market in fourth quarter 2009 and a 5.5 percent increase year-on-year.
The Index  tracks the rental performance of prime office space across 81 major markets in the Americas, Asia Pacific and Europe.  Asia Pacific office markets experienced the highest rental growth of 2.5 percent quarter-on-quarter.  The Americas followed with an increase of 1.1 percent in Q3.
However, economic concerns in Europe have weighed down on markets and growth has come to a virtual halt in that region, from 2.1 percent in Q2 to 0 percent in Q3.
Seven out of the top 10 cities in the Global Office Index for Quarter 3 were in Asia Pacific;  two were in South America and one the United States.
The ongoing strength of the global technology sector meant that Silicon Valley (+60 percent), Bangalore (+19.7 percent) and San Francisco (+17.1 percent) had positive rental performances, with Silicon Valley ranked number 1 on the list of strongest annual increases in rents between Q3/2010 and Q3/2011.
Demand from the commodities sector supported strong year-on-year growth in Perth (+26.9 percent), moving Perth up to number five on the global list.
Australian Head of Leasing at Jones Lang LaSalle, Kevin George said, “The Global rankings comparing Q3/2010 with Q3/2011 show Perth right up the front of the pack at number 5 globally, Sydney in 15th spot, Adelaide 18th, with Melbourne, Brisbane and Canberra further down the rankings.
“Perth moved to the front of the rental pack in Australia in Q2/2011 and maintained that position in Q3/2011. The demand from resource and resource related tenants continues to drive vacancy down and rents up in the Perth CBD.
“Over the third quarter, the strongest markets – from a rent growth perspective – were Sydney and Perth.  Prime gross effective rents increased by 4.5% in Sydney during Q3/2011 and by 8.3% in the Perth CBD. Prime gross effective rents were unchanged in Melbourne and Brisbane.
“Despite persistent volatility in equity and bond financial markets and a growing consensus that global growth is slowing in 2011 and into 2012, the pace of recovery accelerated in Australian office markets during Q3/2011. Net absorption of 80,000 sqm was recorded, compared with 24,800 sqm in Q2.
“The Australian economic outlook for 2012 remains strong and should support office demand across CBD office markets.  According to economic forecasts, Australia is expecting a pick up in growth from 1.7% this year to 3.4% in 2012.
“Clearly the volatility experienced in global financial markets, if sustained, will impact office markets. But we are expecting the boom in the mining sector will start to flow to the finance and professional services sectors in Sydney and Melbourne through increased M&A activity, initial public offerings and capital raisings,” said Mr George.
Office rents rose further in most markets in Asia Pacific in quarter three, although at a slower rate than previous quarters. Of the 27 featured office markets, 18 saw advances in net effective rents; for the remainder, rents either stabilised or recorded small residual declines.  Aggregate rental growth was largely similar to the previous quarter, with an average quarter-on-quarter increase across the region of 2.5percent, as stronger growth in some Australian cities helped offset weaker behaviour in Asia.  In Q2, the quarterly rental uplift averaged 2.4 percent.
Dr Jane Murray, Head of Research, Asia Pacific at Jones Lang LaSalle commented: “The picture across Asia Pacific is diverse, reflecting varying conditions within markets in terms of occupier demand, available stock, landlord expectations and local economic drivers. We expect rents to increase in most markets over the short term, although Hong Kong and Singapore may witness some softening given their greater exposure to global economic conditions, while a few other laggards are also likely to see either no growth or some residual rental declines.  Rental growth of up to 25 percent is predicted across the region for 2012, with the strongest uplifts likely to be seen in markets such as Beijing and Jakarta.”
2012 Outlook for Rents:  Looking ahead to 2012, Jones Lang LaSalle is expecting positive rental growth in major global prime office markets during 2012.  Most major markets are expected to see at least single-digit growth, with some markets such as Beijing, Tokyo, San Francisco and Toronto having the potential to outperform in 2012.  In Asia Pacific, Jones Lang LaSalle is currently forecasting further increases in rents and capital values of between 5%-10% in 2012 for most office markets.  In Australia, the office market will continue to perform in 2012 despite a large supply pipeline – vacancy rates will remain low.