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News release

Chicago, IL

Small to Mid-Sized Companies Holding Up Office Tenant Expansion in United States

Jones Lang LaSalle expands U.S. Agency Leasing and Property Management teams as demand spreads around the globe


CHICAGO, Aug. 16, 2011 – While the strength of the U.S. economy continues to waver, the small-to mid-sized professional and business companies are driving tenant expansion in the second quarter 2011, leading a somewhat slower than expected march toward increased absorption and stabilizing domestic rents. In the world’s main global office markets, double-digit rental uplifts are expected in many markets where the balance is shifting in favour of landlords.

The U.S. office market absorbed 11 million square feet in the second quarter of 2011 —the greatest amount of quarterly absorption since the fourth quarter of 2007, according to Jones Lang LaSalle’s Second Quarter 2011 United States Office Outlook. In addition, the U.S. office sector appears to have bottomed out from a pricing standpoint after five consecutive quarters of either stable or slightly declining/inclining rents.

“Office owners and landlords around the nation are feeling more confident and aren’t willing to drop rents beyond today’s market bottom. Landlord concessions continue to drop, as both free rent periods and tenant improvement allowances are down more than 10 percent from their peaks in 2010,” said Gregory Green, President of Agency Leasing in the Americas. “Landlords are also seeing sustained space demands as small to medium-sized companies have increased their space needs, which helps fill the gap between the larger companies that are still not broadly in expansion mode. Despite the recent economic turbulence, uncertainty and mixed messages in the U.S., we should see strong leasing activity through the second half and into 2012.”

Conditions also are improving on a global level. The global office vacancy rate stands at 14.2 percent and is gradually falling. Rental growth on prime office space in the world’s top-tier markets is at its highest level since the fourth quarter of 2007, averaging 11 percent over last year across 23 major markets.  During the second quarter, the strongest increases were recorded in Moscow, Beijing, Jakarta and Sao Paulo.  Rental uplift is now also becoming more entrenched across the whole Asia Pacific region and selected top-tier markets in Europe. 

“In Asia Pacific, specifically, transaction activity is strong ending with 1.4 million square meters, which matches the same amount of absorption in the first quarter 2011, but that’s still a strong 28 percent increase over last year,” added Gavin Morgan, Deputy Managing Director and Head of Leasing for Hong Kong. He said there is a strong pipeline of supply in all markets in the region except Hong Kong, where both current and pipeline supply remain low with a corresponding impact on rents and values.

“The region is benefitting from expectations that any future labor force cuts will be limited compared to other regions of the world,” Morgan said.

 In Europe, demand for office space across Europe was unspectacular in the second quarter with circa 2.7 million square meters (29 million sq ft) of leasing, which is 2 percent higher than the first quarter and 4 percent higher than the second quarter of last year,” said Bill Page, head of EMEA for Jones Lang LaSalle. “European leasing activity is still moving in the right direction landing eight percent above the 10-year average,” he said.”

With a recovery in leasing activity underway across the globe, Jones Lang LaSalle has benefitted with increased demand for its services. In the United State alone, Jones Lang LaSalle has won just under 6.5 million square feet in agency leasing assignments; just over 5 million square feet in property management assignments; and approximately 690,000 square feet of combined agency leasing and property management assignments—a total of about 12.3 million square feet in the second quarter.

“Our expertise is growing domestically as the control of offices properties changes and new owners recognize the value of outsourcing their services to performance experts,” said Dan Pufunt, U.S. President of Property Management for Jones Lang LaSalle. “We’re taking advantage of the uptick—growing our portfolios, expanding our teams and constantly seeking innovation to better service our clients.”

To better service serve its growing business, the real estate firm added 10 agency leasing hires and 32 property management hires in the second quarter in the United States. 
 
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 185 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $43 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com