Rising new technology industries and economic recovery are set to drive double digit rental growth in the fifteen leading Global Cities over the next five years, according to a new report by Knight Frank.
With rents at the start of a new cycle, a new wave of property development is expected to accommodate future economic growth. Building will be focused on new districts, like New York’s Brooklyn, and Nine Elms in London. Skyscrapers will be the preferred means of maximising sites to deliver large volumes of space.
James Roberts, Head of Commercial Research at Knight Frank, said: “Premium pricing for real estate is found in those cities with the most high value knowledge workers, which consequently attract the world’s leading corporations. These are the ‘Global Cities’ and they are set to experience double digit rental growth in their respective office markets due to substantial demand and restricted supply of new commercial stock.”
“Strategically launched at the end of September, Global Cities is intended to help our clients in the process of planning their future business strategy for the upcoming financial year. The report is an excellent tool for developers, global active investors, companies or financial institutions,“ said Horatiu Florescu, President and CEO of Knight Frank’s associate office in Romania, The Advisers/Knight Frank.
James Roberts, Head of Research at Knight Frank, said: “A new world of technology revolution with humans providing the creative impetus is generating a renaissance in the commercial property world. Offices are thriving as ideal forum for idea generation while work and home are drawing closer so many of us want to live near the bright lights. Firms today are scrambling to secure knowledge workers and the trend for a return to urban living has turned the global cities into talent magnets, and consequently multi-national corporations feel it is essential to locate within them.”
Restricted supply of new office stock in conjunction with this heightened demand for commercial space will see vacancy rates diminish in key cities by 2019 with the average vacancy rate dropping to just 6.3 per cent in the top 10 cities globally. Vacancy rates in Tokyo and London will drop to just 3.9 and 4.4 per cent respectively.
“We think that effects of market recovery will also be felt in Romania. The volume of investment in the local market has already risen significantly this year (with a forecast of 700-800 million at the end of 2014, a marked increase compared to the year of crisis 2009, which recorded an investment of 63 million euro). Moreover, we expect a constantly growing activity of tenants, as the economic recovery takes hold more widely along with growth in technology and infrastructure,” adds Horatiu Florescu.
“Our data illustrates the opportunity for property investors and developers, who are in a position to exploit the growing trend for urban living across the globe,” explained James Roberts. “There was $202bn of global commercial real estate investment in 2009 and we forecast this amount to increase to $606bn in 2015, as just a taste of market activity to come.”
The ‘old continent’ offers portfolio diversity while the steady income comes especially from emerging markets. Europe recorded increases on both occupiers and investment markets: in 2009, the European property investment reached US$ 103 billion, while in 2009, the volume of investment amounted to US$ 196 billion.
