Global Demand For Office Space Held Up Well In Q1
GLOBAL – A recently published report by Jones Lang LaSalle (JLL) stated the economic recovery led to an improvement in fundamentals during the first three months of the year, with investment into hotels, retail, and offices increasing on a par with or in excess of the overall market, reported The Business Times on Monday evening (23 May, SGT).
According to the report entitled “A Global Real Estate Perspective,” demand for office properties across the globe held up well in Q1 2022, as quarterly leasing volumes surged 36 percent year-on-year. However, office rental volumes are still below pre-pandemic norms as it’s 24 percent down compared to that in Q1 2019.
While the global office vacancy level slightly increased again in Q1 to 14.7 percent, prices of high-quality and premium office space remains resilient. In addition, the peak of the office development cycle is expected to happen this year, while issues like Russia’s invasion of Ukraine and rising building costs affect future pipeline, said JLL in its report.
Nonetheless, there was a flurry of activity in global properties thanks to strong demand, abundant liquidity, and less operational uncertainty. This resulted in Q1 2022 being the most active first quarter on record for capital market investment volumes.
In fact, capital market investment volumes across the world jumped by 47 percent to US$292 billion on an annual basis during the first three months of the year, with all three regions – Americas, EMEA, and Asia Pacific – witnessing solid growth in transaction activity.
“The depth and diversity of investors and lenders is supporting strong liquidity and healthy bidder pools,” said the JLL report. “Allocations to real estate continue to rise, funds that closed during Q1 were oversubscribed by an average of 10 percent and global dry powder remained near all-time highs at US$388 billion.”
According to JLL Global Capital Markets’ CEO Richard Bloxam, the first quarter looked healthy with a lot of equity, well-capitalised lenders, and investors all interested in deploying into real estate.
Moreover, he disclosed that investors from Europe and North America are under-allocated in Asia Pacific, and most of them are seeking to raise their allocation in the region, and this “will be a growth engine for the world”.
However, cross-border real estate acquisitions moderated to historic norms at the start of 2022, after a record quarterly activity in the last quarter of 2021. Still, private investors played a larger role in the markets, accounting for over 43 percent of transaction volumes – a record share of activity.
The report also warned that real estate markets across the word face renewed headwinds because of elevated inflation, geopolitics, and tightening monetary policy, with sentiment shifting in recent weeks. Although ongoing strength is expected for the rest of 2022, risks have increased, and a degree of caution is now needed, advised the authors.