Colliers Global Office Report

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Colliers Global Office Report

  1. 1. 2012 | officeGLOBAL office2013 OUTLOOK GLOBAL OFFICE MARKETS SHOW STABILITY IN THE FACE OF HEADWINDS The global economy has seen recent headwinds from the smoldering eurozone debt crisis, slowing growth in GLOBAL CAPITALIZATION RATES / PRIMe YIELDS: 10 Lowest cities China’s economy and the forecasted American fiscal cliff. Yet our overall global view of office real estate is moderately positive. While many large occupiers have taken a wait-and-see attitude toward the global economy, CBD CAP RATE (%) others are leasing up much-needed space to accommodate expanding operations. Quality office buildings in MARKET (Ranked by JUNE DEC JUNE major global cities are seeing consistent demand from both occupiers and investors. June 2012) 2012 2011 2011 Taipei 2.50 2.60 2.80 • ●U.S. is showing gradually lowering vacancy rates. Canada’s office market continues to perform well Hong Kong 2.67 2.94 3.22 and is seeing notable development activity in major markets. Office absorption has been largely driven Vienna 3.50 3.50 3.50 by Intellectual Capital, Energy and Education (ICEE) sectors. Singapore 3.90 4.20 4.30 • Mexico and Brazil report slightly higher vacancies, due to a combination of speculative construction and London - West End 4.00 4.00 4.00 slackening economic growth. Yet São Paulo still boasts the ultra-low vacancy rate of 3.3%. Zurich 4.00 4.10 4.10 • Average Central Business District (CBD) office rents remained broadly unchanged across key EMEA Geneva 4.25 4.25 4.00 markets, but this has been a result of limited supply more than increased demand. Business confidence Beijing 4.31 4.32 5.93 across Europe is firmly negative, which does not bode well for the next year of activity. Paris 4.50 4.50 4.50 • China’s slowing growth has dampened office demand in some Asian markets. Beijing’s office market Munich 4.50 4.50 4.50 Tokyo 4.50 4.50 4.60 remains healthy, but appeared lackluster when compared to an extremely active 2011. GLOBAL OFFICE OCCUPANCY COSTS: Top Three Markets by Region: June 2012 Cap Rate (%) TOP 10 CITIES Asia Pacific 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 CLASS A / NET RENT (USD/SF/YR) EMEA Taipei 2.50 MARKET (Ranked by JUNE DEC JUNE Hong Kong 2.67 June 2012) 2012 2011 2011 North America Vienna 3.50 Hong Kong 166.70 178.34 185.91 Latin America Singapore 3.90 London – West End 125.65 120.31 124.50 Zurich 4.00 Tokyo* 106.01 110.17 104.91 London - West End 4.00 Rio de Janeiro 90.40 93.05 85.70 New York, NY - Midtown Manhattan 4.70 Paris 87.50 87.23 97.73 Vancouver, BC 4.75 Moscow 83.58 75.78 64.64 London – City 76.18 75.29 77.97 New York, NY - Midtown South Manhattan 4.90 Perth 75.77 73.85 74.74 Buenos Aires 9.00 Geneva 63.70 65.31 72.83 Mexico City 9.00 São Paulo 63.50 63.43 71.42 Rio de Janeiro 10.25*Tokyo rents listed are gross rents.www.colliers.com
  2. 2. trends and forecast | 2012 | office | GLOBALGLOBAL 2013 FORECAST: Office Demand Outlook Arrows• Expect only modest improvement in North American office vacancy rates over the next two years, with the exception of a few strong ICEE markets.• Central and Eastern Europe are feeling the effects of economic stagnation. Office demand to remain stable Greater certainty in the eurozone is still some ways away, although a continued improvement in activity is expected by mid-2013.• Rents in UK regional markets should remain stable due to the lack of Grade A Office demand to increase space. Most markets will reach a ‘tipping point’ by mid-2013 at which time further rental growth is expected.• The outlook for the Beijing office property market, especially in the Class A Office demand to decrease sector, should continue to be positive; with investment market in the office property sector to also remain strong.> UNITED STATES OFFICE DEMAND DRIVEN BY TECH, ENERGY However, the fate of the office vacancy rate does not merely depend upon anIntellectual Capital, Energy and Education (ICEE) markets continue to generate a increase in office workers; new construction also plays a role in the calculation.disproportionate share of office absorption in the US, and nine of the 10 US As a result, the 2012 vacancy rate’s drop below 15% is not likely to be betteredmarkets with the highest Q2 absorption have strong ICEE industries, led by by a 14% vacancy rate in 2013. Look for only modest improvement in officeHouston, Oklahoma City and Boston. The average vacancy rate was 140 basis vacancy rates over the next two years.points lower in ICEE-dominated markets. > RESOURCES SUPPORTING CANADIAN DEMAND, BOND RATESFor the first time in nearly five years, in Q1 2012, the US office vacancy rate DRIVING INVESTMENT Observers expect continued slow and steadydropped below 15%. The rate continued to decline by 13 basis points to 14.29% economic performance, with no exceptional wins or losses on the radar forin Q2. New supply is delivered to the market at approximately the same pace as Canada. The divide between the east and west is firmly entrenched, with thethe trailing five-quarter average. With 38.4 million square feet of new construction energy and mining sectors driving stronger results in Alberta, Saskatchewanstill underway, additions to supply will impede improvement in occupancy or and British Columbia. Ontario and Quebec will post more moderate growth, asrental rates over the next four to eight quarters. the economy in the United States gradually improves, exports gather speed and the manufacturing sector recovers.United States: 2013 OutlookCBD office buildings are outperforming the suburbs as companies consolidate Canada: 2013 Outlookoperations into the central core of Metropolitan Service Areas (MSAs), and this Economic growth will be impacted by a retraction of government stimulustrend will continue in 2013. Large spaces are in stronger demand as a result of spending and weakening consumer activity as household debt curtails retailthis consolidation. As in 2012, landlords will be able to increase rents for large sales growth. The fundamentals of all major office markets continue to be veryspace users at lease renewal. solid, with the national vacancy rate under 6%. Demand for office space will be muted in the east, while resource-oriented western markets continue to be hot.Professional and business service employment accounted for approximatelyone-third of the monthly job growth in 2012, averaging 150,000 per month. As a result, 2012 should end with a steady performance, with a further pick-up in Top 10 Office Markets with the Most SPACE Victoria 6%  4.75% $34.53 Vancouver 5.5% $41.92 Calgary Under Construction (Square Feet) $21.64 6.2% $20.61 Seattle MARKET JUNE 2012 Montreal 6.5% $22.80 São Paulo 14,641,067  Tokyo 11,325,147 6% New York- 4.7% Boston $25.63 Midtown $35.80 6.5% $16.85 New York- Downtown  5% $23.14 4.9% $25.87 New York- Midtown South Beijing 9,827,581 5.6% $24.71 6.5% Chicago Jakarta 9,228,884 San Francisco $13.71 Average Class A Denver Net Rents and Mexico City 8,481,452 Cap Rates – June 2012 Rio de Janeiro 7,661,260 7.8%  $100 or more $11.49 Shanghai 5,480,466 Atlanta  $50 to $100 New York, NY -  $25 to $50 Downtown Manhattan 5,200,000  0% $36.8  less than $25 Panama City 4,226,862 Houston N/A Singapore 3,896,532Rents are US$/SF/YR.p. 2 | Colliers International
  3. 3. trends and forecast | 2012 | office | GLOBALgrowth commencing in 2013. The investment market will continue to be very activewhile bond rates remain low and investors turn to real estate as a safe yield-producing investment. Key risks on the Canadian radar are the fragile condition ofEurope, the U.S. Fiscal Cliff and slowing growth in resource-hungry emergingeconomies.> MEXICO’S ECONOMIC GROWTH DRIVES OFFICE DEMAND AND  9% $31.20 Mexico CityCONSTRUCTION Mexico City saw the construction of more than 2.1 millionsquare feet of office space in the first half of 2012, which has pushed up overallvacancy rates. 893,405 square feet were absorbed in the first quarter of 2012 andmore than 1.9 million square feet in the second.This 100% increase in market activity is to some extent due to the addition ofbuildings with pre-leased space to the inventory. It is worth noting that even withincreased inventory, average rental rates did not show significant fluctuations andremained relatively stable. Average Class A Net RentsMexico: 2013 Outlook and Cap Rates – June 2012The Mexican economy will continue to advance at a steady pace, with employmentand wages showing slight increases and a GDP growth rate that is expected toreach 3.7% by the end of 2012, and continue this trajectory in 2013. The recentlyelected Institutional Revolutionary Party presidential candidate Enrique Peña Nieto  $100 or more 10.25% $90.40will push for some energy and labor reforms, however the initiatives of the newadministration should not significantly shift Mexico’s growth trajectory.  $50 to $100 Rio de Janeiro > SÃO PAULO BOASTS LOW VACANCY, ALTHOUGH ABSORPTION HASMODERATED Brazil’s dynamic economy of recent years has contributed to a new  $25 to $50 less than $25  9% $34.21 Buenos Airesglobal perception of Brazil as a hub for investment and capital. The cities of Rio de N/AJaneiro and São Paulo have a combined Class A office inventory of more than 26million square feet and Rio de Janeiro has no room for new buildings in itsdowntown. The average vacancy across both cities is 6.8%. Rio de Janeiro’svacancy is 10.4% while São Paulo’s is only 3.3%.Brazil: 2013 OutlookDespite low vacancy rates, there has been some moderation in office demand. Theaverage asking lease prices decreased by 0.7% from Q1 to Q2 2012 in São Pauloand Rio de Janeiro. Net absorption in Q2 was the lowest it has been since the thirdquarter of 2009. Therefore, we predict slackening demand and limited supply will Rental rate changes are calculated using period US$ exchange rates and may reflectprovide only a slight increase in occupancy and rental rates through 2013. fluctuations in currency exchanges. Rents are US$/SF/YR.São Paolo Skylinep. 3 | Colliers International
  4. 4. trends and forecast | 2012 | office | GLOBAL> LOW CONFIDENCE FOR EMEA BUSINESSES, BUTBRIGHT SPOTS PERSIST The first half of 2012 was Average Class A Net Rentsdominated by economic stagnation across Europe. Theeurozone contracted by 0.2% quarter-over-quarter in Q2 12and re-entered technical recession in Q3 12 with a 0.1% q/q and Cap Rates – June 2012 4.75% $61.74 Stockholmcontraction. Central and Eastern Europe are feeling the  $100 or moreeffects. Positive indicators for H1 12 in Germany and Francehave given way to more sobering numbers with  $50 to $100  5% $20.56 Copenhagenmanufacturing and service purchasing manager indicessuggesting a further period of economic uncertainty and  $25 to $50  4.7% $31.05 5%stagnation. Both economies expanded by a modest 0.2% q/qin Q3 12 and this was not enough to counter balance  less than $25  4% $125.65 London Hamburg $26.81 Berlincontractions in the eurozone periphery N/A  4.5%   $87.50 4.5% 3.5% 4% $38.81 $26.11EMEA: 2013 Outlook Paris  $47.04 4.25% Munich ViennaAverage CBD office rents remain broadly unchanged across $63.70 Zurichkey EMEA markets; in most cases this has been the result of Genevalimited supply, rather than robust demand. A 13% y/y drop inthe volume of investment transactions was recorded acrossEurope in the first part of 2012. Despite sagging businessconfidence across EMEA, Q3 12 transaction levels saw a Rental rate changes are calculated using period US$ exchange rates and may reflect fluctuations in currency exchanges Rents are US$/SF/YR.modest rise, although the increase is lagging better results inacross AsiaPac and the Americas. Greater certainty in the eurozone is still some United Kingdom: 2013 Outlookways away, although a continued improvement in activity is expected by mid-2013. Rents in UK regional markets should remain stable due to the lack of Grade A space. Speculative construction has been absent from these markets since 2008 and this> UNITED KINGDOM STILL SEEN AS SAFE ENVIRONMENT FOR REAL trend is projected to continue. Most markets will reach a ‘tipping point’ by mid-2013ESTATE INVESTMENT Despite the fact that the UK economy saw a surge in Q3 at which time further rental growth is expected. Rents in Central London will also12, the economy will finish the year on a weaker note. Nevertheless, relative political come under upward pressure with the West End market set to see new historicaland economic stability continues to augment the perception of Britain as a ‘safe highs for prime rents.haven’ for direct investment in real estate. As a eurozone outsider, the UK hasbenefited, attracting strong capital flows not only from eurozone countries, but also > SUSTAINED DEMAND IN GERMAN OFFICE MARKET After a mildfrom North America, Asia, and the Middle East. Prime office yields are stable at contraction in Q4 11, the German economy bounced back with GDP growth in Q1 12around 4% in London’s West End and between 5% and 5.25% in the City. reaching 0.5% q/q. Since then the growth rate has tapered off to 0.2% q/q in Q3 12. The exposure of German banks to the Spanish property market remains a worryingLondon remains the top European office investment market with a 20%+ y/y factor, but export growth is also a worry as world trade has slowed.increase in sales volume in H1 12. The vacancy rate in Central London was stablebetween H2 11 and H2 12 at 6.9%. Several UK markets have seen disappointing Take-up in the six main German office markets stood at approximately 13.9 milliontake-up levels so far in 2012, although London’s West End has seen an increase in square feet in the first half of 2012, which represents a 9% y/y decline. Nevertheless,pre-leasing activity and rents are still climbing. the overall vacancy rate fell from 9.7% in H1 11 to 8.4% in 2012. Demand fromHelsinki at duskp. 4 | Colliers International
  5. 5. trends and forecast | 2012 | office | GLOBALprofessional services firms has been steady and may explain some of the notablerental increases; there have been sustained lettings of higher-priced space incentral locations. The two most expensive locations for office investment remainHamburg with prime yields of 4.7% and Munich at 4.5%. These low yields are aresult of high demand for a limited amount of new supply. Investors remain focusedon these markets due to continued good turnover figures, but also these markethave a degree of safe haven status as leading markets in what is perceived as themost stable member of the eurozone.Germany: 2013 OutlookConsidering the economic environment, the German office leasing market has heldup well and will remain stable in 2013. Underlying leasing demand, together withcurrent rental contract negotiations, suggest some modest growth in take-upvolumes. Investors will continue to look for opportunities across the Germanmarkets and prices are expected to remain stable.> FRENCH OFFICE MARKET IN STATE OF EQUILIBRIUM, YET FEARSREMAIN Against an unsettled economic backdrop, the core sectors of France’scommercial real estate market have proven resilient. While supply and demandappear to be in equilibrium, fears of new imbalances are linked to expectations offurther economic deterioration.Take-up of office space in Île-de-France has held up well and stood at over 10million square feet in the first half of 2012. This number was down only slightlyyear-over-year. Transactions involving small units maintained pace, but leasingtransactions for medium-sized suites are down significantly. The supply of new andsecond-generation office space (available within a year) declined by 11% in the pastsix months. Rental rates have stabilized in high-quality buildings. However, acorrection in rental values for lower-quality, second-generation space in the futuremay develop.Commercial property commitments in France in the first half of 2012 represented ayear-over-year increase of 18%. Transactional evidence suggests no significantchange in office yields which, on the best properties, range from 4.5 to 5.5% in theParis CBD. Paris is also seeing safe haven investment due to its status as animportant international financial node. London, EnglandFrance: 2013 OutlookThe trend of shrinking office space availability is expected to be reversed as a current political instability is also a factor. However, the majority of eastern Europeannumber of new construction projects complete in 2013. Despite increased supply, countries are expected to post positive GDP growth in 2012; the regional economythe market is expected to remain stable, provided no unforeseen economic setbacks as a whole is expected to grow by 2.7%. Poland, Russia and Turkey, alongsideoccur. International investors will continue to track Paris for new opportunities. dynamic economies such as Latvia, are helping drive growth in the region.> INVESTOR DEMAND KEEPS OFFICE YIELDS LOW IN CORE NORDIC In line with a decline in economic conditions, office space demand contracted byMARKETS The Nordic growth rates (2013 GDP forecasts range from 1.4% to 2.1%) 24% compared to leasing activity in 2011. Almost all markets were below theare relatively strong when seen against core European markets. AAA credit ratings demand levels seen in the second half of 2011, with the exceptions of Warsaw,for Denmark, Finland, Norway and Sweden have supported the perception that Prague and Zagreb. Nevertheless, rents have remained stable across the region,Nordic markets are safe destinations for capital. with a notable 10.3% increase recorded in Moscow. The volume of investment transactions also fell in comparison to the same period of 2011, mainly as a result ofOffice investors have shown great appetite for property in primary locations, reduced debt finance availability. This has kept transactions focused on the larger,pushing up the yield spread between primary and secondary Nordic markets. The more liquid Polish and Russian markets.number of investment transactions has been increasing. Denmark and Sweden inparticular have seen a higher volume of cross-border transactions. CEE: 2013 Outlook We expect the transaction trend focusing investment on larger, more liquid markets (mentioned above) will continue over the next 12 months. We also expect to seeNordics: 2013 Outlook subdued activity from both demand and supply in the near term, with continuedA modest increase in investment activity is expected in 2013, particularly divergence in activity by geography. Market uncertainty combined with restrictedconcentrated in primary Nordic markets and from international investors; a shift in construction finance availability will continue to constrain new supply. This shouldpreference among tenants to cost-effective, modern and green office buildings is keep vacancy rates at current levels in most markets.also likely. Leasing markets will remain stable.> CEE SEES LOWER OFFICE DEMAND DESPITE POSITIVE ECONOMY > SOUTHERN EUROPE’S RENTS STILL FALLING; MIDDLE EASTAlthough, the Central and Eastern Europe (CEE) region is showing more economic HAMPERED BY OVERSUPPLY There was further weakening in the headline-growth than Western Europe, the region is vulnerable to Western European grabbing markets of Southern Europe. Athens saw a 7.1% decrease in asking rentseconomic performance. This has been very apparent in Hungary and the Czech and Madrid recorded a 2.1% fall. Vienna saw a slight increase in CBD rental levelsRepublic whose economies both contracted over the first half of 2012. Both in the first half of 2012, while the rents in the Benelux markets recorded no changes.countries are very dependent on trade with the western European core, although Geneva saw a marginal fall in rents. A decrease in rents is expected in Swissp. 5 | Colliers International
  6. 6. trends and forecast | 2012 | office | GLOBAL Major Office Markets with the Largest Period Change in Rent “ The unresolved European debt crisis and slowing QUOTED UNITS OF TIME JUNE DEC MARKET CURRENCY MEASUREMENT PERIOD 2012 2011 CHANGE economic growth in China have eroded Hong Kong’s Jakarta IDR SM Month 242,192.00 174,249.00 39.0% Bogotá USD SM Month 33.00 27.40 20.4% economic growth prospects. Calgary, AB CAD SF Year 42.62 36.00 18.4% Inflationary pressure Chicago, IL USD SF Year 16.85 14.50 16.2% from the third round of Denver, CO USD SF Year 13.71 12.19 12.5% US quantitative easing is Moscow USD SM Month 75.00 68.00 10.3% expected to push up real Stuttgart EUR SM Month 19.00 17.50 8.6% São Paulo BRL SM Month 114.50 106.00 8.0% estate values, where the Buenos Aires USD SM Month 30.70 28.60 7.3% local currency is pegged to Beijing CNY SM Month 336.11 313.69 7.1% the US dollar.”* - Change in rent as measured in local currency, unit of measurement and time period.markets, due to poor demand levels; the strength of the local currency is impacting headquarters and Danone Group’s securing of 76,435 square feet at Kerry Parkside.business activity substantially. Switzerland and Austria also saw significant declinesin office investment activity in comparison to the first half of 2011. Average gross yields in Shanghai’s Class A office sector declined to 5.8% during the third quarter, a decrease of 10 basis points from the previous quarter.Southern Europe: 2013 OutlookFurther falls in rental levels are expected. With low occupational demand and Shanghai: 2013 Outlookcreeping investment volumes, prime office yields will continue to soften further in The limited number of recent land transactions indicate that developers still remainAthens, Milan, Madrid and Rome. The largest increase in 2012 was recorded in cautious about making land acquisitions for further commercial development.Lisbon, at 50 basis points. > BEIJING OFFICE MARKET SEES NARROWING AVAILABILITY DespiteAcross the Middle East, political and economic uncertainty continues to translate weak economic performance in many developed economies, Beijing, as the capitalinto poor performance in local real estate markets, with low demand from both of China, will continue to attract overseas and domestic enterprises as they establishtenants and investors. A further weakening of the Cairo market was noticeable, as or expand their offices. Beijing’s overall office property market was stable in the firstwell as major declines in rents in the main office markets of UAE and Saudi Arabia, half of 2012. The disequilibrium between supply and demand remained unchangedwhere significant oversupply was the cause. as new completion was limited, leading to a continued narrowing availability across the board.> OFFICE DEMAND FROM FINANCIAL AND MAINLAND COMPANIES INHONG KONG The unresolved European debt crisis and slowing economic growthin China have eroded Hong Kong’s economic growth prospects. Inflationary pressure 4.32%from the third round of US quantitative easing is expected to push up real estate $58.94 4.5%values, where the local currency is pegged to the US dollar. Beijing $106.01 TokyoOffice rents showed signs of stabilization in 3Q 2012 due largely to the solid demand 2.5%from a range of medium-sized financial companies and the support of mainland 2.67% $27.64enterprises. Leasing demand was soft in the city’s Class A office market. Overall net $166.70 Taipeiabsorption fell 26% quarter-over-quarter to 386,000 square feet in 3Q 2012. Hong KongHong Kong: 2013 OutlookDue to the limited supply of Class A office buildings for lease, the vacancy rate on 3.9%Hong Kong Island will remain low in 2013, with the exception of Central/ Admiralty, $63.35where falling demand for top-tier office premises is anticipated to cause the vacancy Singaporerate to edge up further. Overall, the average vacancy rate will settle around its Average Class A Net Rents and Cap Rates – June 2012historical average of 5% by the end of 2012.With the external uncertainties and tightening of mortgage lending criteria, $100 or more Brisbaneinvestment sentiment in the office market weakened during 3Q 2012. The averageyield of Hong Kong Class A offices compressed 20 basis points to 3.1% in July 2012. $50 to $100 7.5% $58.94The decrease in Class A office yield reflected the strong demand for Class A offices $25 to $50by investors. 6.9% Sydney $60.85 7.5% less than $25 Adelaide $36.13 7.32%> NEW OFFICE CONSTRUCTION AND PRELEASING ACTIVITY IN 7.06% $34.42 $47.35SHANGHAI The average rental rate for Class A office space in Shanghai continues Market with gross-rent data only Canberra Melbourneto grow. Citywide, vacancy increased to 9.5% due to the launch of five new projectsin the downtown area, including the high-profile L’Avenue and SOHO CenturyAvenue. A number of high-profile leases were signed, including Adidas’ 187,293 Rental rate changes are calculated using period US$ exchange rates and may reflectsquare feet in Shanghai International Commerce Center for their new China fluctuations in currency exchanges. Rents are US$/SF/YR.p. 6 | Colliers International
  7. 7. trends and forecast | 2012 | office | GLOBALAlthough demand from both multinationals and domestic enterprises was firm, the Over 1.7 million square feet of new office space entered Seoul’s office market in theleasing market in the first half of 2012 appeared lackluster when compared to the first half of 2012, with the completion of the K Twin Tower in the Central Businessextremely active year of 2011. The average net effective rent continued to climb, but District and three buildings in the Gangnam Business District (GBD). New supply isthe growth momentum softened, associated with declining transaction volume. The expected to continue to edge up in the CBD and YBD.office property investment market was also active, evidenced by several transactionsconcluded during the review period. The vacancy rate for offices in Seoul fell 0.76% in the first half of 2012 to 6.97%. There was almost no vacancy in the area’s Class A+ office buildings, which had anBeijing: 2013 Outlook average vacancy rate of 0.11%. The average rent for an office in Seoul in the firstThe outlook for the Beijing office property market, especially in the Class A sector, half of 2012 increased by 4.46% over the previous period. The net absorption inshould continue to be positive. However, negotiations between landlords and Seoul’s office market during 2Q 2012 increased remarkably from the previoustenants could become more elastic in the near term. The investment market in the quarter to nearly 1.6 million square feet.office property sector of Beijing will remain active. Seoul: 2013 Outlook> TOKYO OFFICE USERS TAKE ADVANTAGE OF OVERSUPPLY The Low supply, increased rental rates and a slight decrease in vacancy point toTokyo Class A office market continues to experience frequent tenant relocations as moderate improvement in the Seoul market in 2013. However, new supply will keepoccupiers take advantage of an oversupply by upgrading the quality of their office strong gains in rent or occupancy in check.space while reducing overall rents. Office development has been concentrated inthree central wards of Tokyo, with 2012 marking the second-biggest year for new > SINGAPORE CLASS A CENTRAL BUSINESS DISTRICT RENTS TOoffice construction since 2003. FALL The global economic environment has weighed down Singapore’s officeOffice properties in Tokyo’s central business districts and major cities are enjoying leasing activity, pushing average Class A gross rents in the CBD down by 5.4%. Thisthe greatest interest from institutional investors, with more than 80% of investment represented a reversal of the rental growth trend that had been steadily gainingcapital focused in the central six wards of Tokyo, according to data from RCA. More steam since the office market bottomed out in the end of 2009.than half of the total transaction volume in Japan is made up of office property sales.Tokyo ranked fourth globally in volume of office property transactions valued over Singapore: 2013 Outlook$10 million per asset in the past 12 months. Lowered office rents will improve Singapore’s competitive edge as a regional hub for business. Overall CBD office space vacancy rates inched down from 12.8% inTokyo: 2013 Outlook December 2011 to 12.6% in June 2012. There is a threat of an impending supplyHigher vacancy rates have accompanied the new supply from 2012, however overhang. In addition to the steady lineup of new office buildings that will bevacancy should begin to decline again soon. Class A rents are stabilizing, with some completed over the next four years, a substantial amount of secondary space couldproperties showing rental rate increases. Although average rents will decline be returned to the market upon lease expiration as existing tenants move to newslightly through the end of 2012, we project they will begin to increase moderately premises. CBD Class A office rents are expected to continue decline through 2013.in late 2013. > SLOWING ECONOMY REINS IN INDIAN OFFICE DEMAND India’s> SEOUL SEES DROPPING VACANCY DESPITE NEW OFFICE economic growth has slowed, a result of uncertainties in domestic policy, theCONSTRUCTION A number of Class A office buildings have come online in Seoul cumulative impact of monetary tightening and slackening of external demand.in the last year in both the Central Business District (CBD) and Yeouido Business Rental rates for Class A office space in Mumbai will remain stable across mostDistrict (YBD) . This construction came on the heels of the successful launch of the submarkets. In Delhi, Class A rents increased by 2% to 7% over the previous quarterInternational Finance Centre(IFC) in the Yeouido Business District’s (YBD) first in popular locations such as Connaught Place and Nehru Place, while 4% to 10%Class A office building in 2011. drops were seen in Jasola and Saket.Yokohama Skylinep. 7 | Colliers International
  8. 8. trends and forecast | 2012 | office | GLOBALWhile construction activities remained moderate in Mumbai in Q2 2012, Dehli saw allocations to direct property. This means that the demand for prime assets is goingfast-paced activity in a newly developed area near Delhi Airport named Aerocity. to become more competitive in 2013. However, the outlook for rental growth is moreTwo projects located at Aerocity, Aria Signature Office and IBIS Commercial Tower, limited. It is likely we will see some growth in Brisbane and Perth CBD rents, whiledeveloped by JW Marriot and IBIS Hotel respectively, added approximately 200,000 Melbourne and Sydney CBD rents remain flat in 2013.square feet of Class A space to the market. > NEW EARTHQUAKE POLICIES IN NEW ZEALAND HIT CBD OFFICEIndia: 2013 Outlook The implementation of earthquake-prone buildings policies has had a profoundGoing forward, the rental values for Class A office space are expected to remain effect on the New Zealand CBD office market over the last 12 months. The processstable in almost all Delhi and Mumbai submarkets. of obtaining an engineering evaluation while maintaining insurance has been an expensive exercise for institutions and private owners. Wellington has been hit the> FOREIGN INVESTORS ACCOUNT FOR HALF OF AUSTRALIAN hardest.PROPERTY PURCHASES The Australian economy continues to show signs ofstrength, with GDP growth of 3.7% recorded in the first nine months of 2012. This Leasing activity at the top end of the market has remained firm in Wellington as arelatively strong growth is no doubt a contributor to strong foreign interest in result of the growing number of office tenants looking to move away from buildingsAustralian property, with offshore purchasers now accounting for around a half of perceived to be earthquake-prone, and this has helped keep prime rentals buoyant.all purchases in 2012. However, the Auckland CBD office market has been the stronger performer of the two cities. Prime CBD office space remains tight in buildings around the CBD.Although economic growth is strong, the two-speed nature of Australia’s economymeans that some office markets are performing far better than others from a tenant New Zealand: 2013 Outlookdemand perspective. In particular, office markets in the resource-rich states of The economic climate in New Zealand remains muted over the next few years andWestern Australia and Queensland are showing stronger rental growth than the the complexity surrounding the Wellington office market hinders any chance oflarger economies of Victoria and New South Wales. However, investment patterns seeing sustained rental growth in the next few years. Less fortunate are owners ofare not following leasing demand. Demand for office assets is higher in Sydney and the older Class C or even B buildings who face a nasty cocktail of decreasing valueMelbourne CBDs, even though these cities are both seeing a decline in rents. and demand, along with increasing insurance costs. Auckland is more resilient, supported by job growth prospects and likely economic growth. Landlords of better-Australia: 2013 Outlook quality buildings in both Auckland and Wellington can anticipate an increase in rentalThere is a strong outlook for investment in Australian office markets. Although in the next 12 months.foreign purchasers are dominating at present, local Australian REITS have nowrecapitalized and Australian pension funds have also expressed interest in increasingBrisbane, New Zealandp. 8 | Colliers International
  9. 9. trends and forecast | 2012 | office | GLOBAL local measure / currency cbd rents cbd rent cbd rent us MEASURE local currency dollars/sq ft/yr Average cbd cap exchange AVERAGE AVERAGE Average class a rate quoted TIME rate (USD) class a class a class a Gross / prime MARKET COUNTRY unit currency PERIOD JUNE 30, 2012 net rent gross rent net rent rent yield (%) asia pacific Adelaide Australia SM AUD Year 0.98 380.00 485.00 36.13 46.11 7.50 Brisbane Australia SM AUD Year 0.98 620.00 750.00 58.94 71.30 7.50 Canberra Australia SM AUD Year 0.98 362.00 440.00 34.42 41.83 7.32 Melbourne Australia SM AUD Year 0.98 498.00 617.00 47.35 58.66 7.06 Perth Australia SM AUD Year 0.98 797.00 956.00 75.77 90.89 8.00 Sydney Australia SM AUD Year 0.98 640.00 776.00 60.85 73.78 6.90 Beijing China SM CNY Month 6.36 336.11 366.11 58.94 64.20 4.31 Chengdu China SM CNY Month 6.36 145.28 164.33 25.48 28.82 7.60 Hong Kong China SF HKD Month 7.76 107.76 125.14 166.70 193.58 2.67 Shanghai China SM CNY Month 6.36 307.00 261.00 45.77 53.81 4.50 Jakarta Indonesia SM IDR Month 9,385.00 242,192.00 299,588.00 28.76 35.58 8.10 Tokyo Japan SM JPY Year 79.82 91,113.00 106.01 4.50 Auckland New Zealand SM NZD Year 1.25 334.00 466.00 24.86 34.69 8.40 Wellington New Zealand SM NZD Year 1.25 343.00 442.00 25.53 32.90 8.19 Makati City Philippines SM PHP Month 41.82 895.00 23.85 9.00 Singapore Singapore SF SGD Month 1.27 6.68 8.45 63.35 80.13 3.90 Seoul South Korea SM KRW Month 1,141.15 64,575.00 23,896.00 63.06 23.34 6.00 Taipei Taiwan SM TWD Month 29.80 739.00 887.00 27.64 33.17 2.50 Bangkok Thailand SM THB Month 31.55 680.00 725.00 24.02 25.61 8.30 EUROPE, MIDDLE EAST AND AFRICA (EMEA) Tirana Albania SM EUR Month 0.79 15.50 21.87 14.00 Vienna Austria SM EUR Month 0.79 18.50 26.11 3.50 Antwerp Belgium SM EUR Month 0.79 10.40 14.68 7.00 Brussels Belgium SM EUR Month 0.79 15.00 21.17 6.00 Sofia* Bulgaria SM EUR Month 0.79 9.00 12.70 9.00 Zagreb* Croatia SM EUR Month 0.79 12.50 17.64 9.00 Prague* Czech Republic SM EUR Month 0.79 15.50 21.87 6.50 Copenhagen Denmark SM DKK Month 5.87 108.30 20.56 5.00 Cairo Egypt SM USD Month 1.00 21.75 24.24 9.00 Tallinn Estonia SM EUR Month 0.79 13.40 18.91 7.50 Bordeaux France SM EUR Month 0.79 13.50 19.05 6.50 Lyon France SM EUR Month 0.79 18.80 26.53 6.00 Marseille France SM EUR Month 0.79 15.90 22.44 6.15 Paris France SM EUR Month 0.79 62.00 87.50 4.50 Berlin Germany SM EUR Month 0.79 19.00 26.81 5.00 Düsseldorf Germany SM EUR Month 0.79 23.00 32.46 5.20 Frankfurt Germany SM EUR Month 0.79 30.00 42.34 5.20 Hamburg Germany SM EUR Month 0.79 22.00 31.05 4.70 Munich Germany SM EUR Month 0.79 27.50 38.81 4.50 Stuttgart Germany SM EUR Month 0.79 19.00 26.81 5.40 Athens* Greece SM EUR Month 0.79 13.00 18.35 7.75 Budapest* Hungary SM EUR Month 0.79 12.50 17.64 7.75 Dublin Ireland SM EUR Month 0.79 20.00 28.23 7.50 Milan Italy SM EUR Month 0.79 40.00 56.45 5.50 Rome Italy SM EUR Month 0.79 29.00 40.93 5.85 Riga Latvia SM EUR Month 0.79 12.00 16.94 8.00 Vilnius Lithuania SM EUR Month 0.79 13.50 19.05 8.50 Amsterdam Netherlands SM EUR Month 0.79 17.80 25.12 6.65* Rents reflect combined A and B Class.p. 9 | Colliers International
  10. 10. trends and forecast | 2012 | office | GLOBAL local measure / currency cbd rents cbd rent cbd rent us MEASURE local currency dollars/sq ft/yr Average cbd cap exchange AVERAGE AVERAGE Average class a rate quoted TIME rate (USD) class a class a class a Gross / prime MARKET COUNTRY unit currency PERIOD JUNE 30, 2012 net rent gross rent net rent rent yield (%) EUROPE, MIDDLE EAST AND AFRICA (EMEA) continued Oslo Norway SM NOK Year 5.96 3,250.00 50.65 5.50 Warsaw* Poland SM EUR Month 0.79 22.20 31.33 6.50 Lisbon Portugal SM EUR Month 0.79 15.21 21.47 8.00 Bucharest* Romania SM EUR Month 0.79 15.00 21.17 8.00 Moscow* Russia SM USD Month 1.00 75.00 83.58 9.50 Saint Petersburg Russia SM USD Month 1.00 33.00 36.78 10.00 Jeddah Saudi Arabia SM SAR Year 3.75 934.00 23.13 Riyadh Saudi Arabia SM SAR Year 3.75 1,130.00 27.99 10.00 Belgrade* Serbia SM EUR Month 0.79 15.50 21.87 9.00 Bratislava* Slovakia SM EUR Month 0.79 11.00 15.52 7.50 Madrid Spain SM EUR Month 0.79 23.50 33.17 5.90 Stockholm Sweden SM SEK Year 6.92 4,600.00 61.74 4.75 Geneva Switzerland SM CHF Month 0.95 54.17 63.70 4.25 Zurich Switzerland SM CHF Month 0.95 40.00 47.04 4.00 Istanbul Turkey SM USD Month 1.00 28.67 31.95 7.00 Kyiv* Ukraine SM USD Month 1.00 23.00 25.63 12.00 Abu Dhabi United Arab Emirates SM USD Month 1.00 30.46 33.95 Dubai United Arab Emirates SM USD Month 1.00 32.90 36.67 10.00 Belfast United Kingdom SF GBP Year 0.64 12.50 19.63 6.25 Birmingham United Kingdom SF GBP Year 0.64 21.00 32.98 6.00 Bristol United Kingdom SF GBP Year 0.64 24.00 37.70 6.25 Edinburgh United Kingdom SF GBP Year 0.64 21.00 32.98 6.00 Glasgow United Kingdom SF GBP Year 0.64 23.00 36.12 6.00 London – City United Kingdom SF GBP Year 0.64 48.50 76.18 5.25 London – West End United Kingdom SF GBP Year 0.64 80.00 125.65 4.00 Manchester United Kingdom SF GBP Year 0.64 22.00 34.55 6.00 LATIN AMERICA Buenos Aires Argentina SM USD Month 1.00 30.70 35.75 34.21 39.84 9.00 Rio de Janeiro Brazil SM BRL Month 2.01 163.00 186.50 90.40 103.43 10.25 São Paulo Brazil SM BRL Month 2.01 114.50 137.00 63.50 75.98 10.25 Bogotá Colombia SM USD Month 1.00 33.00 36.20 36.78 40.34 8.25 San José Costa Rica SM USD Month 1.00 17.75 19.48 19.78 21.71 10.76 Mexico City Mexico SM USD Month 1.00 28.00 31.00 31.20 34.55 9.00 Panama City Panama SM USD Year 1.00 20.00 24.00 1.86 2.23 9.50 Lima Peru SM USD Month 1.00 20.00 20.60 22.29 22.96 12.50 north AMERICA Calgary, AB Canada SF CAD Year 1.02 42.62 62.00 41.92 60.98 5.50 Edmonton, AB Canada SF CAD Year 1.02 23.20 41.44 22.82 40.76* Rents reflect combined A and B Class. p. 10 | Colliers International
  11. 11. trends and forecast | 2012 | office | GLOBAL local measure / currency cbd rents cbd rent cbd rent us MEASURE local currency dollars/sq ft/yr cbd cap average rate exchange AVERAGE AVERAGE average class a / prime quoted TIME rate (usd) class a class a class a gross yield MARKET COUNTRY unit currency PERIOD JUNE 30, 2012 net rent gross rent net rent rent (%) Guelph, ON Canada SF CAD Year 1.02 11.47 23.10 11.28 22.72 7.25 Halifax, NS Canada SF CAD Year 1.02 17.03 32.36 16.75 31.83 Montréal, QC Canada SF CAD Year 1.02 23.18 42.00 22.80 41.31 6.50 Ottawa, ON Canada SF CAD Year 1.02 26.79 49.30 26.35 48.49 6.95 Regina, SK Canada SF CAD Year 1.02 24.70 40.40 24.30 39.74 7.00 Saskatoon, SK Canada SF CAD Year 1.02 25.00 38.00 24.59 37.38 7.00 Toronto, ON Canada SF CAD Year 1.02 29.20 58.40 28.63 57.25 Vancouver, BC Canada SF CAD Year 1.02 35.10 55.00 34.53 54.10 4.75 Victoria, BC Canada SF CAD Year 1.02 22.00 36.00 21.64 35.41 6.00 Waterloo Region, ON Canada SF CAD Year 1.02 13.65 25.28 13.43 24.87 7.25 Atlanta, GA United States SF USD Year 1.00 11.49 22.99 11.49 22.99 7.80 Bakersfield, CA United States SF USD Year 1.00 9.31 17.40 9.31 17.40 Baltimore, MD United States SF USD Year 1.00 12.22 23.22 12.22 23.22 Birmingham, AL United States SF USD Year 1.00 20.92 20.92 20.92 20.92 Boise, ID United States SF USD Year 1.00 14.71 20.71 14.71 20.71 Boston, MA United States SF USD Year 1.00 25.63 45.63 25.63 45.63 6.00 Charleston, SC United States SF USD Year 1.00 20.09 30.09 20.09 30.09 8.00 Charlotte, NC United States SF USD Year 1.00 23.80 23.80 23.80 23.80 Chicago, IL United States SF USD Year 1.00 16.85 37.35 16.85 37.35 6.50 Cincinnati, OH United States SF USD Year 1.00 13.72 23.22 13.72 23.22 9.75 Cleveland, OH United States SF USD Year 1.00 22.00 22.00 22.00 22.00 Columbia, SC United States SF USD Year 1.00 19.39 19.39 19.39 19.39 Columbus, OH United States SF USD Year 1.00 11.23 19.89 11.23 19.89 Dallas/Fort Worth, United States SF USD Year 1.00 15.00 25.00 15.00 25.00 TX Denver, CO United States SF USD Year 1.00 13.71 29.56 13.71 29.56 6.50 Detroit, MI United States SF USD Year 1.00 23.63 23.63 23.63 23.63 12.00 Fresno, CA United States SF USD Year 1.00 15.90 24.00 15.90 24.00 9.00 Ft. Lauderdale- United States SF USD Year 1.00 17.58 31.08 17.58 31.08 Broward, FL Grand Rapids, MI United States SF USD Year 1.00 11.38 19.33 11.38 19.33 9.25 Hartford, CT United States SF USD Year 1.00 10.40 22.90 10.40 22.90 Honolulu, HI United States SF USD Year 1.00 18.48 35.16 18.48 35.16 Houston, TX United States SF USD Year 1.00 36.80 36.80 36.80 36.80 Indianapolis, IN United States SF USD Year 1.00 11.55 19.05 11.55 19.05 8.00 Jacksonville, FL United States SF USD Year 1.00 9.54 19.44 9.54 19.44 Kansas City, MO United States SF USD Year 1.00 11.04 19.04 11.04 19.04 Las Vegas, NV United States SF USD Year 1.00 19.84 30.84 19.84 30.84 Little Rock, AR United States SF USD Year 1.00 8.89 15.59 8.89 15.59 9.50 Los Angeles, CA United States SF USD Year 1.00 20.36 36.36 20.36 36.36 6.90 Louisville, KY United States SF USD Year 1.00 19.06 19.06 19.06 19.06p. 11 | Colliers International
  12. 12. trends and forecast | 2012 | office | GLOBAL local measure / currency cbd rents cbd rent cbd rent us MEASURE local currency dollars/sq ft/yr cbd cap average rate exchange AVERAGE AVERAGE average class a / prime quoted time rate (usd) class a net class a class a gross yield MARKET COUNTRY unit currency period JUNE 30, 2012 rent gross rent net rent rent (%) NORTH AMERICA continued Memphis, TN United States SF USD Year 1.00 8.26 16.71 8.26 16.71 Miami-Dade, FL United States SF USD Year 1.00 24.73 40.23 24.73 40.23 Milwaukee, WI United States SF USD Year 1.00 8.57 19.60 8.57 19.60 Minneapolis, MN United States SF USD Year 1.00 5.48 15.25 5.48 15.25 Nashville, TN United States SF USD Year 1.00 21.77 21.77 21.77 21.77 6.50 New York, NY - Downtown United States SF USD Year 1.00 23.14 47.62 23.14 47.62 5.00 Manhattan New York, NY - Midtown United States SF USD Year 1.00 35.80 70.34 35.80 70.34 4.70 Manhattan New York, NY - Midtown South United States SF USD Year 1.00 25.87 47.26 25.87 47.26 4.90 Manhattan Oakland, CA United States SF USD Year 1.00 17.80 31.80 17.80 31.80 7.50 Oklahoma City, OK United States SF USD Year 1.00 17.78 17.78 17.78 17.78 Omaha, NE United States SF USD Year 1.00 10.88 19.88 10.88 19.88 Orlando, FL United States SF USD Year 1.00 13.23 24.23 13.23 24.23 8.50 Philadelphia, PA United States SF USD Year 1.00 14.86 26.50 14.86 26.50 8.00 Phoenix, AZ United States SF USD Year 1.00 10.70 23.70 10.70 23.70 Pittsburgh, PA United States SF USD Year 1.00 11.86 22.61 11.86 22.61 8.26 Portland, OR United States SF USD Year 1.00 14.74 24.74 14.74 24.74 Raleigh/Durham/Chapel Hill, United States SF USD Year 1.00 23.41 23.41 23.41 23.41 NC Reno, NV United States SF USD Year 1.00 21.73 21.73 21.73 21.73 Sacramento, CA United States SF USD Year 1.00 25.39 32.64 25.39 32.64 San Diego, CA United States SF USD Year 1.00 13.82 28.68 13.82 28.68 San Francisco, CA United States SF USD Year 1.00 24.71 44.81 24.71 44.81 5.60 San Jose - Silicon Valley United States SF USD Year 1.00 16.61 33.11 16.61 33.11 Savannah, GA United States SF USD Year 1.00 12.15 19.15 12.15 19.15 9.50 Seattle/Puget Sound, WA United States SF USD Year 1.00 20.61 30.63 20.61 30.63 6.20 St. Louis, MO United States SF USD Year 1.00 6.97 17.47 6.97 17.47 9.75 St. Paul, MN United States SF USD Year 1.00 4.08 13.17 4.08 13.17 Stamford, CT United States SF USD Year 1.00 25.34 38.84 25.34 38.84 8.00 Stockton, CA United States SF USD Year 1.00 16.88 20.64 16.88 20.64 8.50 Tampa Bay, FL United States SF USD Year 1.00 14.15 23.15 14.15 23.15 8.00 Walnut Creek/Pleasanton, CA United States SF USD Year 1.00 27.60 27.60 27.60 27.60 8.00 Washington DC United States SF USD Year 1.00 31.19 53.19 31.19 53.19 5.75 West Palm Beach/Palm Beach County, FL United States SF USD Year 1.00 22.25 37.25 22.25 37.25 8.50 White Plains, NY United States SF USD Year 1.00 18.26 32.06 18.26 32.06 8.00p. 12 | Colliers International
  13. 13. trends and forecast | 2012 | office | GLOBALGlossaryClass A Gross Rent – The average rent quoted per Quoted Currency – The currency quoted locally insquare foot per annum for Class A office building all lease transactions. Not necessarily national 522 offices inwithin the CBD plus additional costs such asproperty taxes, service charges or operating currency. (Note: Chile utilizes Unidad de Fomento, which equals USD 24.30) 62 countries onexpenses. Time Period – The standard way in which leases 6 continentsClass A Net Rent – The average rent quoted per are quoted. Usually on a per month or per year United States: 147square foot per annum for a Class A office building basis. Canada: 37within the CBD. Existing Inventory – Existing office floor space Latin America: 19 (Classes A, B and C) within each city’s CBD (central EMEA: 118Class A (Prime) Buildings – Most prestigious Asia Pacific: 201building competing for premier office users with business district).rents above average for the area. Buildings have • $1.8 billion in annual revenue Under Construction – The total office floor spacehigh quality standard for finishes, state-of-the-art (Classes A, B and C) within each city’s CBD (central billion square feet under • 1.25systems, exceptional accessibility and a definite management business district) which is under construction, butmarket presence. not yet completed, giving an indication of the • More than 12,300 professionalsCharacterized by: Prime central locations; first- development pipeline for each market. This includesclass tenant improvements; on-site parking; state both available and pre-let floor space. COLLIERS INTERNATIONALof the art elevators and HVAC systems; concrete Unit – The normal convention locally in which area 601 Union Street, Suite 4800and steel construction; contemporary design and is measured. Usually on a per square foot or per Seattle, WA 98101architecture; high quality of upkeep and square meter basis. tel +1 206 695 4200maintenance; ability to command a premium rent Vacancy Rate (%) – The percentage of the inventorywithin the relevant market. The Class A building (total completed office floor space, Classes A, B and regional authors/contributorsdesignation implies that the size of the building is C, within the CBD) which is unoccupied.“significant” in accordance with the market. James Cook (U.S.) Jeff Simonson (U.S.) KC Conway (U.S.) Cliff Plank (U.S.)GLOBAL RESEARCH CONTACTS Flavio Gómez Aranzubia (Mexico) Zuzanna Baranowska (EMEA)> Americas > ASIA PACIFIC Mark Charlton (U.K.) Dr. Walter Boettcher (U.K)James Cook Simon Lo Yumiko Yasada (Japan)USA Asia Simon Lo (Asia)james.cook@colliers.com simon.lo@colliers.com Nerida Conisbee (Austrialia) Ian MacCulloch (Canada)KC Conway Nerida Conisbee Alan McMahon (New Zealand)USA Australia/New Zealand Chia Siew-Chuin (Singapore)kc.conway@colliers.com nerida.conisbee@colliers.com Arthur Yim (Hong Kong) Damian Harrington (CEE) Carlby Xie (North China)> Europe, Middle East and Africa Amit Oberoi India Lauren Chlebowski | Global Brand DesignerMark Charlton amit.oberoi@colliers.comUnited Kingdommark.charlton@colliers.com Yumiko YasudaBruno Berretta Japan Copyright © 2012 Colliers International.EMEA yumiko.yasuda@colliers.com The information contained herein has been obtainedbruno.berretta@colliers.com from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannotDamian Harrington guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult theirEastern Europe professional advisors prior to acting on any of thedamian.harrington@colliers.com material contained in this report. Accelerating success.www.colliers.com

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