Global commercial property returns

The recent economic improvements across regions have resulted in "upside surprises" for commercial real estate, the property consulting firm said in its research report out this month.

The improvements range from compressing yields across Asia-Pacific office markets to growing transaction volumes in Europe and a decline in sublease space in the United States.

The debt-repayment challenges of Dubai will herald a new era of more controlled and regulated growth and a greater emphasis on corporate governance and market transparency throughout the Arabian Gulf.

Recent improvements in the capital markets include the revival of the US CMBS (commercial mortgage-backed securities) marketplace, the favourable spread between banks' borrowing costs and their lending rates and the reappearance of life insurance companies as buyers of commercial real estate.

A look at global transaction volume during the past 90 days underscores the nature of orderly flow for high-quality assets, rather than distressed fire sales.

Recent transaction volumes point to a resumption in billion-dollar deals and cross-border investment and lending.

Corporate mergers-and-acquisitions activity will facilitate a greater need for occupiers to consolidate, integrate or upgrade their space needs.

The company's "Global Market Perspective" also provides specific predictions for various markets around the world.

In Asia, many regional office markets are likely to turn the corner by the end of the year and return to their normal growth trend next year.

In Europe, investment volumes are expected to increase by nearly 20 per cent this year, a return to 2002 levels and well below the long-term trend.

In the US, national average cap rates are expected to reach their cyclical peak as early as this quarter, but capital values will continue to decline during the first half before stability by the third quarter at a total peak-to-trough average of near 50 per cent.