A Cushman & Wakefield Research Publication - 2017 Global Forecast

GLOBAL

AMERICAS

APAC

APPENDIX

EUROPE

OFFICE SECTOR Based on historic norms, the United States is generally not overbuilding office space. For instance, there is currently more than 100 msf of new completions expected for 2017 and 2018—30% lower than the peak levels observed prior to the Great Financial Crisis (GFC) and 60% lower than the levels observed during the Dot-com Boom. But the bulk of what is under construction is highly concentrated in a handful of markets (e.g. Dallas, Washington, DC, Manhattan, and San Francisco). Arguably, these are also the cities that need new space the most, as they have been some of the strongest absorbers throughout this cycle. Nevertheless, this new wave of space will challenge the leasing fundamentals as it delivers at a time when broader job growth is decelerating, due in part to labor shortages. Certain pockets of Manhattan and Washington, DC, are already seeing concessions and TI’s push higher to help lease available space. But by and large, the Sunbelt markets and most other secondary/tertiary markets are seeing measured construction levels, and in many cases, are underbuilding relative to job creation. Overall, U.S. asking rents likely peaked in the first half of 2016; year-end asking rents grew 4.8%

AMERICAS KEY FACTS

Secondary market comeback

Tech markets slowing Tech hubs peaked earliest in the cycle and many are now bumping up against labor shortages and housing affordability challenges.

Secondary markets will see the clearest move up in office-using job growth rates and rankings.

Rise in deliveries

U.S. construction activity 50% of new office buildings delivering in 10 markets. Secondary/tertiary markets: measured construction levels and underbuilding relative to job creation.

In Canada, 34% of deliveries in markets with highest vacancy (Calgary and Edmonton). Mexico, uptick in deliveries to outpace demand in 2018.

Rent growth Notable increase 2017 - 2019:

What to watch Headwinds and tailwinds vary greatly across North America and its Latin American neighbors, but the region is poised to expand over the coming years.

Seattle 6.8% Toronto 6.6% Winnipeg 6.4% Raleigh/Durham 4.8% Oakland 4.2%

16 / Cushman & Wakefield