Momentum in the leasing markets slowed moderately in Q1 2016 as occupiers carefully reconsidered relocation and expansionary plans, with leasing volumes marginally lower (-1%) on a year-on-year basis. Volumes in both Europe and Asia Pacific held up well during Q1 2016, increasing by 14% and 7% respectively year-on-year. Leasing volumes in the United States fell by 10% year-on-year to the lowest level since the Global Financial Crisis as concerns over the economy’s stability grew. In the context of a weaker-than-expected first quarter, we have revised down our global projections for the full-year 2016 and now forecast leasing volumes to broadly match 2015 levels, with some upside potential of up to 5%. Asia Pacific is projected to outperform the other regions, with volumes growing by around 10%-15% in 2016.

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Office construction in the Capital is at its highest level for eight years, according to Deloitte’s latest London Office Crane report, which measures the volume of office development taking place across central London. Recognising that the low supply of available office space across central London offers a limited choice for tenants, developers have responded by starting a record number of new schemes since the last survey. The latest results show that the volume of office construction has increased by 28 percent over the past six months to 14.2 million sq ft the highest level since the beginning of 2008. In just 18 months activity nearly doubled from 7.7 million sq ft in 2014. The financial sector has leased the largest share of office space under construction in the latest results, accounting for 2.3 million sq ft, or 39% of the let space while currently accounting for 38 percent of the space let, the TMT sector is a leading occupier group.

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CHICAGO—Two years ago, most commercial real estate executives had a sunny outlook on the industry, but recently that optimism has been tempered the economic weakness abroad and a suspicion that prices might be at or near a peak. According to DLA Piper’s 2016 State of the Market Survey, 62% of top executives remain bullish about the sector over the next 12 months, down from 89% in 2014. The law firm will unveil the full results of the survey at its Global Real Estate Summit, held today in Chicago.  

“People are still relatively, cautiously optimistic,” Jay Epstein, co-chair of DLA Piper’s global real estate practice, tells GlobeSt.com. “But there is an obvious change in people’s feelings. We’re in a much different place than we were 18 months ago.”

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Much of the data is in from Q1, and US office outlook is a mixed bag. While outlooks leading into the new year optimistically called for further expansion across the nation’s markets, the stock market’s erratic behavior, a weakening China and falling oil prices have shifted expectations from growth to caution. Despite the flip, real estate fundamentals remain solid and are poised to remain landlord-favorable for the rest of 2016.

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As large office tenants leave the suburbs for the urban core, what is happening to all the campuses being left behind? “[Figuring] out what to do with the vacant corporate campuses left behind is a quandary for civic leaders and landlords across the U.S.,” noted a recent Wall Street Journal article. “Towns have pondered turning them into gyms, community centers or education facilities, but finding large tenants for such spaces has proven difficult, and nearby residents often resist plans to build dense apartment complexes on empty sites.”

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AUSTIN, TX—On the heels of news that the Austin area’s population officially passed the 2 million mark, the office market is also reaching record highs for occupancy and rental rates. According to new figures from the research team with Cushman & Wakefield/Oxford Commercial (CWOC), the Austin office market’s vacancy rate was 8.5% at the end of the first quarter, meaning the average of all office space was 91.5% occupied. Meanwhile, the overall asking rental rate hit an all-time historic high of $33.52 per square foot–which translates to a 6.2% increase from this time last year, when the rate was $31.55. The current rental rate is the highest ever recorded by CWOC since it started tracking statistics in the early 1990s.

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CHICAGO—Is 2016 the year of the landlord? Transwestern came to that conclusion after looking over the first quarter data for Chicagoland’s office market. Overall vacancy declined to just 15.4%, the lowest rate in eight years. Furthermore, rental rates ticked up to $28.45 per square foot and the firm predicts rates will continue to rise. “CBD office market fundamentals have reached prerecession levels as it is clear that downtown Chicago is no longer in recovery mode,” the firm notes. “As vacancy tightens downtown (currently at 12.1%), the suburban office market is poised to follow.”  

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NEW YORK CITY—The city’s diverse economy continued to drive leasing during the year’s first quarter, according to a new research report by Avison Young, with job growth across all office-using employment sectors.

While the unemployment rate here is 5.4%—compared to 4.9% nationally—increased hiring activity at the start of the year by financial services, technology and information, and professional and business services companies—coupled with slight expansion across these industries—bodes well for office properties.

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It’s safe to say that the glory days of Corporate Drive in Hyattsville are over. The nine office buildings, in a style that might be called Late-’80s Squat, line a wide thoroughfare that’s deserted at rush hour. The building at number 8100, nestled into a small hill, appears to be sinking. Through its black-tinted windows, the accoutrements of office life are visible—pastel carpets, a maze of cubicles, a workroom kitchen where fluorescent light glints off the counters—but no one works there. The parking lot is empty.

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Atlanta’s office market is hitting on all cylinders. Citywide, class A full-service gross asking rents for office space rose by $0.73, according to PM Realty Group’s latest research. That set a new all-time high of $25.97 per square foot in the first quarter of 2016. Office rental rates in Atlanta have jumped 7.8% or $1.89 within the past 12 months. Class A direct occupancy rates have improved by 240 basis points to 86.5% over the prior 12 months due to solid leasing demand and limited office construction coming online. That means office rental rates have surpassed the prior peak recorded in 2008.

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