CHICAGO—Uncertain economic conditions, especially in China and Europe, has resulted in subdued rental growth for offices across much of the globe, according to a study just published by DTZ Research. The firm's Occupier Perspective Global Office Review H1 2013 looked at the performance of 90 markets throughout the US, Asia and Europe.

“The global picture for the first half of this year is showing that most global corporations are waiting to see whether the global economic recovery will provide a sustained demand for their goods and services before they commit to expanding their office space,” says Milena Kuljanin, one of the study's authors.

In the US, the researchers found that a majority of studied markets had lower absorption rates than recorded in the first half of last year. DTZ attributed the lower rates to a tech slowdown. The now-commonplace desire of occupiers to shrink their footprints by designing more collaborative and open work environments also limited absorption. A limited supply, however, offset both factors.

John Wickes, the Chicago-based head of the firm's Americas Research division, says that “the low absorption reflects caution and cost control amongst US occupiers.” And even though DTZ expects collaborative work environments will contribute to overall business growth, it also means “traditional class A high-rise and suburban office parks are generally less favored than before.”

In April, GlobeSt.com reported that the firm had reorganized their research arm, making Wickes the head of the North American research department and unifying researchers who had worked for DTZ, which was acquired by UGL in late 2011 and Equis, a Chicago company bought by UGL in 2006.

The researchers included 20 US markets in the study, and found that only Philadelphia and Baltimore experienced rental declines over the first half of the year, due to slower occupier activity. And even though New York continued its development as a technology hub, a sector that strongly favors the new and more efficient methods of organizing workplaces, it also maintained momentum, recording a rental increase of 2.5%.

Most US markets, however, experienced modest rental growth. Midwestern cities like Chicago and Indianapolis were slightly below the national average of 1%, while the somewhat healthier Minneapolis was slightly above average.

In the next five years, the DTZ researchers say a limited supply of office space and modest job growth will offset the slowdown caused by the proliferation of tech companies and their more-efficient use of office space. They forecast an average annual rental increase of 1.7% in US markets. However, that will remain below the 2.2% global forecast, with the Asia Pacific region leading the way.

“Although occupiers are likely to continue focusing on cutting costs for some time to come, limited choice of space and improving economic conditions will lead to rental growth across most US markets,” says Wickes. “We project the greatest US rental uplift in New York over the next five years, at an average annual rate of 3.4%. However, in a wider global context, this growth rate is relatively low, nearly half the projected growth in the major global cities of London and Hong Kong.”

Instant Insights /

DTZ Sees Modest US Rental Growth

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