Market Trends of Global Office Space Industry
This section covers the major market trends shaping the Office Space Market according to our research experts:
Increase in Office Space Vacancy Rate
Overall sentiment and activity in office markets across the world are improving, although at differing speeds. Third-quarter of 2021, global leasing volumes were higher than a year ago. However, they remained 25% lower than Q3 2019, showing that the recovery, although underway, is far from over. All regions are below Q3 2019 volumes. The global net absorption turned positive in the third quarter of 2021 for the first time since the onset of the pandemic.
Vacancy continued its upward trajectory in Q3 2021, adding 30bps over the quarter to 14.6%. This is the slowest rate of increase since the onset of the pandemic. Following delays to project completion, 2022 is anticipated to be the peak of the development cycle. The picture fluctuates significantly by region. In the United States, development completions are expected to hit a high point this year and then slow appreciably next year, while in Europe and Asia-Pacific, the pipeline continues to grow into 2022 by 24% and 13%, respectively. This will add to the upward pressure on vacancy rates over the coming months.
Increase in Office Space Rent
Office re-entry rates still vary significantly by country but are now starting to rise around the world. This is important, as before new space requirements are cemented, corporates need more evidence of how hybrid office and remote work impacts their demand profile. Tenant-friendly conditions persist in most markets, with landlords eager to attract tenants. However, rents for premium or prime buildings have increased in some markets as occupiers increasingly look for quality. The banking and financial services industry continues to be the dominant occupier of premium office space globally.
International businesses are looking to their workplaces to revitalize their corporate brand and culture after the pandemic, which will see significantly improved amenities and services available for employees. Despite over a year of restricted access to offices, businesses continue to identify workplaces as an essential component of their corporate identity and vital to retaining and reinvigorating employees post-pandemic.
