Global Office Rent Tracker

Brighter Horizon or False Dawn? Mixed Signals for Global Office Rents
CBRE Global Office Rent Tracker Q1 2021

After a tough 2020, global office markets are showing some early signs of stability. Market fundamentals remain weaker than in 2019, but forward-looking indicators in many markets signal improvement later this year, with the Asia-Pacific region leading the way in terms of leasing activity.

CBRE’s Global Office Rent Tracker monitors the change in prime rents across major office markets. Most markets showed no rent change in Q1 2021 compared with Q4 2020. Markets roughly fall into two groups: those still at or near the top the pre-COVID expansion cycle with diminishing rates of rent growth, and those seeing declining rents to a greater or lesser degree. Recovery paths vary by market, largely depending on the extent of vaccine rollouts and corporate confidence.

In Asia-Pacific, a rise in tenant inquiries and site inspections translated to stronger demand in Q1. Underpinned by steady demand from the tech and financial sectors, regional Class A net absorption increased for the third consecutive quarter to almost regain the pre-pandemic level of Q1 2020. Despite this, the region remains broadly tenant-favorable: Vacancy rates increased in more than half of APAC’s major markets and most saw falling office rents, albeit at a slower rate. Among the exceptions to this, Singapore and Auckland showed early signs of rental rate recovery as did Seoul and Taipei, both of which reported slight rent increases in Q1. The return to the office and mass vaccinations should help improve APAC leasing demand this year, although there is clear downside risk for India and Japan.

Average prime rent in the EMEA region stabilized quarter-over-quarter in Q1, although remained slightly lower than a year ago. Some markets like Stockholm, Copenhagen and several in the U.K. saw rent increases in Q1, while others like Dublin, Warsaw and Madrid saw declines. Overall office leasing activity in EMEA fell by 23% year-over-year in Q1 but was above the trough levels of mid-2020. Office vacancy rates increased in many markets, thereby limiting growth until recovery gains traction. On an encouraging note, some markets are seeing an uptick in occupier inquiries.

In the Americas, prime rents remained under pressure in Q1 2021. In the U.S., persistently low leasing velocity further weakened market fundamentals, producing one of the lowest quarters for demand on record. Larger, more expensive coastal markets were affected more than lower-cost and high-growth markets like Atlanta, Denver and Dallas. However, with rising vaccinations and warmer weather, client engagement and touring activity picked up sharply at the end of Q1 and the prospect for higher leasing velocity later this year improved significantly. Nevertheless, office vacancy rates are still high in most cities and likely will remain so throughout 2021 as many occupiers reconsider their current space needs in light of a more remote or hybrid workforce. As a result, the decline in office rents will persist, especially for Class A and B properties.

Prime Rent Change (%) for Select Global Markets, Q1 2021 vs Q1 2020
Source: CBRE Research, Q1 2021.