The global property market resumed a steady recovery path following its Q1 lull in activity, according to Jones Lang LaSalle’s quarterly Global Market Perspective report.
According to the report, the global economic outlook has weakened as euro pressure re-emerges. It says Asia Pacific markets continue to drive global growth in 2012, but deceleration is ‘increasingly apparent’.
The report found leasing activities have improved from the Q1 lull, but are still below 2011 levels as corporate occupiers adopt a ‘wait and see’ approach to expansion. Gross leasing volumes for full-year 2012 are expected to be 10 percent lower than in 2011.
Meanwhile, vacancy continues to edge downwards, the report says. The global office vacancy rate declined to 13.3 percent in Q2, which is its lowest rate since 2009. The Americas and Asia Pacific regions continued to see vacancy rates fall, while they remained unchanged in Europe.
Simon Storry, JLL Australia head of office investments, says during Q2 2012 leasing activity slowed in Australia. “Rents in many office, retail and industrial markets flatlined,” he says.
“In the Sydney CBD market, contraction by some financial market tenants was offset by migration into the CBD. Across office markets, as in the retail and industrial sectors, a slowdown in demand for space is largely offset by a limited construction pipeline. As a result, vacancy rates remain low and downside risk to rents is limited. In the longer term, continued growth will stimulate another construction cycle.”
Prime yields in Australia have not followed bond yields downwards, in contrast to many offshore markets, according to the report. Storry says as a result the yield spread to bond rates is at record levels in most markets, providing a high measure of valuation support should bond yields revert to long term levels.
“With a global hunt for yield, Australian real estate assets are sharply differentiated on a valuation basis. In addition, spreads between prime and secondary yields are generally wide, providing an incentive to owners and investors to refurbish and reposition assets,” says Storry.