In Europe, a lack of high quality space characterised a number of markets, including London and Frankfurt, and with demand in these cities advancing over the year, prime rents were put under upward pressure. Therefore, although the overall regional picture was relatively muted over the year there were notable differences from market-to-market. A regional uplift of 3% was recorded overall – the highest regional rise seen since before the depths of the economic downturn in 2008.
The most significant rental expansion within the EMEA region was in the Middle East and Africa where rents increased by 14%. Both Qatar and Dubai saw business confidence pick up through the year, resulting in increased office market activity as well as supporting prime rental growth of 10% and 5%, respectively.
However, it was South Africa that experienced the highest rental growth in the EMEA region in 2013, with prime rents accelerating by almost 30%. The South African market saw a notable increase in the amount of large transactions over the year in the midst of a particularly active occupational market.
James Young, Cushman & Wakefield’s head of EMEA offices, said: “Looking ahead for EMEA, the overall lack of high quality space is expected to push many occupiers towards moving sooner rather than later, as they look to secure deals on the limited supply of quality space that is available. With the development pipeline anticipated to continue at low levels until the latter part of 2014, prime rents are likely to remain under pressure.”
Coming out of the double-digit expansion seen in 2012, prime rental growth in the Americas region was much more subdued, with an overall regional rise of just 1%. Rental performance in South America in 2013 was slow, deriving from muted growth in the key markets of Argentina and Brazil. Ongoing economic uncertainty in both of these markets caused occupier demand to ease and prime rents to fall over the year.
Although both Ecuador and Colombia saw burgeoning demand over the year, it was not enough to offset the rental declines in these larger markets. In the year ahead, South America is likely to face more uncertainty, with economic concerns affecting business confidence in a number of locations, although a steady rise in stability across the region will be seen as North America expands.
In the US, demand levels improved in 2013 as the economy recovered quicker than expected. Over the year, the US saw strong leasing activity, with business confidence improving as the year progressed. However, rental performances were mixed across the country, with New York (Downtown) and Boston outperforming other markets. The outlook for 2014 is for the USA to continue to see rental levels expand and thus drive the overall regional growth in the year ahead.
“New York Midtown (Madison/5th Avenue) has reclaimed its crown as the most expensive office market in the Americas,” said Ron Lo Russo, president, New York tri-state region, Cushman & Wakefield. He added: “The Madison/5th Avenue submarket is home to many of the city’s trophy assets which command higher asking rents and is a desired location for occupiers, like hedge funds and private equity firms, willing to pay triple-digit rents.”