Several office real estate hotspots are emerging with high growth prospects, including the seven major emerging markets of Brazil, India, China, Russia, Indonesia, Mexico and Turkey, according to Jones Lang LaSalle’s quarterly global office outlook.

Other markets likely to do well are Hong Kong, Singapore and Poland, the giant property specialist said.

For the first time since the global financial crisis, downside risks are being outweighed by the improving business optimism, although recent turmoil – such as the North African conflicts – could dampen this optimism.

Real estate, which remains a major part of many high net worth clients’ portfolios, has experienced mixed fortunes since global markets were buffeted by the 2008 financial crisis. The report from JLL is significant as the property firm oversees a total of $41 billion of assets, covering a total of 1.8 square feet of properties worldwide.

The JLL report shows that market demand and leasing activity are back in a cyclical upswing, fuelled by improving economic growth, renewed corporate confidence, and strengthened balance sheets and prospects of increasing spending and hiring associated with real estate investment. 

Global office vacancy rates have reached a plateau and have edged downward in late 2010.  The global vacancy rate now stands at 14.1 per cent.

Japan’s earthquake devastation aside, property market fundamentals continue to improve across Asia Pacific, assisted by strengthening business conditions and solid corporate hiring, the report said.

“Regional net absorption is expected to further increase in 2011, and vacancy is expected to fall in most major markets.  However in a few markets that have large impending supply, such as Singapore and some Indian cities, vacancy rates are expected to rise over 2011,” said Jane Murray, Asia Pacific head of research.

The Americas in the year upcoming will be best characterised by an uneven upswing and cautious optimism, said Ben Breslau, managing director of JLL’s Americas research.  North America is expected to accelerate modestly, with continuing improvement in select prime markets such as Washington DC, Midtown Manhattan, and San Francisco.  US vacancy levels are down year-over-year and will close below 18 per cent.  The Canadian office market will tighten with accelerated rent growth in 2011, while Sao Paulo’s strong economic performance is translating into healthy office demand, adds Breslau.

According to the report, business sentiment is at its highest level since 2007 in Europe with occupier and investment transaction volumes recovering strongly. “Occupiers remain cautious with deals still driven largely by lease events and consolidation. We are now in a rental growth phase – led by a limited number of markets – but it could be beyond 2014 in some markets before 2007 market peaks are witnessed again,” said Grant Fitzner, head of JJL’s EMEA research.

JJL is also watching the events in the Middle East and North Africa very closely knowing any impact on oil prices will filter through to capital markets volumes externally, adds Fitzner.

House prices

Meanwhile, industry data showed that residential property prices rose last year, said Knight Frank, the global property consultancy which handles around $886 billion of property annually.

Global house prices rose by 2.8 per cent in 2010 from a year before, according to the latest data from the Knight Frank Global House Price Index.  This rise was led by Asia-Pacific (7.5 per cent), the Middle East (5.3 per cent) and South America (3.8 per cent).

“Of course this headline hides big regional and country level differences, but more concerning is that this annual figure hides the fact that a growing number of countries are seeing negative quarterly price movements,” said Liam Bailey, head of residential research at Knight Frank.  The weakest region was North America which saw no change in the values in the previous 12 month period.