Despite generally positive trends in office markets worldwide, the report's author, senior vice president Ross Moore of the Colliers International Boston office, says "several key financial centers are beginning to feel the effects of the global credit crunch." At the same time, however, he reports emerging economies "remain unfazed" with "a voracious appetite for office space."

The Colliers report is the latest in a series of studies in recent months that have attempted to put the office market, the capital markets and the global economy into perspective as building owners, tenants and investors try to figure out where the office sector is headed. It examines the office sector worldwide on a regional basis, looking at how the sector has performed and might be expected to perform in the US and Canada, Europe, the Middle East, Asia, Latin America and South Africa.

US and Canadian office markets both slowed slightly in the second half of 2007, with US average vacancies holding steady while Canadian vacancies fell 30 basis points to 5.7%. New York City's Midtown market, generally one of the strongest in the US, "softened marginally" with an overall vacancy rate of 6.8% and a class A vacancy rate of 5.8%, according to the report.

Despite that slight softening, Midtown remains the most expensive office space in the US at $190 per sf per year, according to Colliers. As another recent report noted, however, those New York City rents look like a bargain compared with some of the rates in cities worldwide. New York City ranked 10th worldwide on that list, compiled by Cushman & Wakefield Inc., while London remained at the top of the list at $312 per sf per year.

The story in Latin America is a "remarkable surge highlighted by substantially lower vacancies and higher rents across virtually all markets," according to the report. The regional office vacancy rate fell by 1.4% basis points during the second half of 2007 to an average 3.8%. Every market in the region with the exception of Buenos Aires reported higher rents.

Colliers cites "reasonable growth" in Europe, Middle Eastern and South African [EMEA] office markets during the second half of 2007, but the pace of growth slowed slightly. Although many European economies are expected to slow this year, demand is expected to remain strong in Paris and much of Germany.

Despite whatever slowing may have occurred, the Colliers report points out that the average vacancy rate declined again in EMEA markets--down 20 basis points to 6.6%. Construction is continuing in those markets to meet the demand, especially in Dubai, which leads the region and the world with 39.7 million sf under construction. Despite the low vacancies, the report sounds a note of caution. "With all of this construction, and an uncertain business environment, 2008 could see the first average increase in vacancy rates in over three years" in the EMEA region.

In the Asia Pacific region, the Colliers study shows uneven results, with the overall regional vacancy rate increasing by almost a full percentage point to 8.6% while vacancies continue to decline in major financial centers such as Hong Kong, Singapore, Tokyo, Shanghai and Sydney. And Perth again posted the region's and world's lowest vacancy rate, half of a percentage point. But the region's overall increase in vacancy is noteworthy in that it "marks a sharp reversal from the past several years when vacancies had trended down," the Colliers author says.

Office construction continues to burgeon in the Asia Pacific region, with some 126 million sf under way. Demand is expected to continue too, as most economies across the region are expected to continue posting very high growth rates keeping demand high and vacancies relatively stable.