A Cushman & Wakefield Research Publication - 2017 Global Forecast

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10 / Cushman & Wakefield
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
.
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
Source: Cushman & Wakefield Research
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Supply Demand