A Cushman & Wakefield Research Publication - 2017 Global Forecast

GLOBAL

AMERICAS

APAC

APPENDIX

EUROPE

SUPPLY AND DEMAND The world economy will need to create every single one of those new jobs, and then some, because a building boom is upon us. Around the globe, over 700 million square feet (msf) of office space is under construction which will deliver between mid-July 2017 and the end of 2019. That’s the equivalent of five good-sized cities worth of office inventory (e.g., Washington, DC, Dallas, London, Singapore and Shanghai). That new construction will come online in the span of just three years. Although demand will remain robust over that same time period—totaling approximately 520 msf—it will fall far short of supply. That will cause vacancy to rise in most cities around the world. From that perspective, the world is overbuilding. Or maybe it isn’t. Throughout this global expansion it is clear that occupiers have generally favored newly-built-high-quality space over older, Grade B & C product. In the U.S., for example,

newly built space has accounted for 65% of all of the office space absorption since 2012. More often than not, developers have been rewarded throughout this cycle for delivering prime product, even in markets where vacancy is elevated. Nevertheless, vacancy will generally be on the rise in most cities around world. The development boom will be led by Asia Pacific, particularly Greater China. In fact, nearly 60% of the world’s new construction will be concentrated in the Asia Pacific region. Within the region, new supply is concentrated in a handful of markets: Beijing, Shenzen, Shanghai, Manila and Bangalore. Indeed, those five markets account for 55% of construction taking place in Asia Pacific and over one-third of construction worldwide. Much like the supply side, the demand side of the equation is strongest in Asia Pacific. Beijing will have the distinction of leading the world in both supply and demand growth. The Americas region is also in midst of a robust construction cycle, although construction will likely taper off somewhat after 2017. Still, the U.S., Canada, and Latin America will all build more space than they will absorb over the next few years. Again, it varies greatly from one city to the next ( see the Americas section for detailed rankings ). The development pipeline is also ramping up throughout Europe, but not nearly to the same degree. Some European cities—Paris, Vienna, London and Brussels—will hit a cyclical high in new construction over the next two years. Again, those cities report vacancy rates lower than pre-recession levels. It could be argued that they are the most in need of new space. Broadly speaking, supply and demand seem to be the most balanced in Europe relative to the other global regions.

GLOBAL SUPPLY VS. DEMAND 2017 - 2019

0 100 200 300 400 500 600 700 800

MSF

Americas

Europe

APAC

Global

Supply Demand

Source: Cushman & Wakefield Research

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