A presentation from our South African networking event.
After a slow start to the year, the U.S. office market rebounded during the second quarter on the back of sustained tenant demand, consistent economic fundamentals and a raft of a new supply coming to the market. Net absorption over the quarter totaled 8.8 million sq. ft., bringing year-to-date occupancy growth to 9.9 million sq. ft., healthy but below the previous levels of growth 11.7 million square ft. of completions, coupled with relocations and give-backs representing rightsizing from traditional users, helped to push vacancy up by a 10 basis points to 14.8 percent, marking the third consecutive quarter of vacancy increase.
While there is a general post-Brexit slump in sentiment towards the UK, investors continue to see value in real estate across many parts of the rest of Europe. However, return expectations are being scaled down, and the importance of active asset management as a means to access income is being talked up.
To be zero waste certified, a company must prove it is diverting at least 90% of its waste from landfills. Microsoft is the first technology company in the U.S. to receive this endorsement. They have been pursuing this achievement for nearly a decade by exploring, piloting, and introducing sustainability programs across nearly every aspect of the company.
Global growth is strengthening, reflecting improving international trade, investment and manufacturing. In Asia China, Hong Kong, Singapore–and probably Japan and India—should all achieve stronger economic growth in 2017 than most observers predicted six to nine months ago. In Q2 2017, the office sector has emerged as the strongest growth driver in most Asian countries, with several markets recording record-high transaction prices, particularly in Hong Kong and Singapore. However, investment activity in the retail, industrial, hotel and residential sectors has also been robust.
Whether we realize it or not, with Siri, Alexa, Google, and Facebook, we have already started to become contributors to the great consumer focused Artificial Intelligence (AI) disruption. Enterprises, on the other hand, have been slow to figure out the vast AI landscape and how to pragmatically adopt the disruptive technology in order to make efficient use of the three key factors that fuel their engines: time, money, and data.
South Australia is heading towards becoming the most competitive tax jurisdiction for business and commercial property investment in Australia. Stamp duty is a barrier to investment in property, and has become a more significant one when there is a rapid increase in capital values. Last year the SA Government announced changes to parts of the stamp duty legislation with the aim to increase business investment and make SA more competitive. This plan sees stamp duty for certain asset classes cut in three parts with the abolishment of stamp by July 1 2018. The first cut to stamp duty was effective on 5 December 2015 with the second cut effective on 1 July 2017. As we see a lead up to the second cut we are exploring the impact of this time line and the effects this is having on investment in on the commercial property market.
In 2017, companies around the world will spend billions of dollars on their workplaces. But now more than ever, companies must challenge themselves to break old spending habits. The nature of workplace strategy is evolving so rapidly that keeping up — let alone staying ahead of the curve — can be a definite challenge.
2016 was the year flexible workspace took APAC by storm – from local coworking operators scaling rapidly in Beijing and Shanghai, to global juggernaut WeWork taking up large footprints in Shanghai, Hong Kong, Seoul and Sydney. Traditional operator Regus reacted by rolling out its Spaces brand in Singapore, Tokyo and Sydney while others, such as The Executive Centre and Compass Offices are pressing ahead with plans to launch new concepts. Even Servcorp, the market leader in premium serviced offices, has begun to introduce coworking, with an executive feel, in some key locations.
Chinese investment in property in other regions in recent years has been heavily focused on the US. This push to the US has obscured rising intra-Asian property capital flows, which again exceed Asia-to-global flows. Despite firm near-term US economic prospects, we expect slower RMB depreciation and political pressures to cause Chinese investment to shift towards Asian markets from 2017. The continued weight of capital should offset likely rising cost of funds, so that property yields on average stay flat across Asia this year. We remain positive about Asian property, and see particular investment opportunities in China, Hong Kong, Singapore and India.
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