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News release

CHICAGO, IL

U.S. and Global Office Markets Make Gains, Although Optimism is Tepid

Media, technology and multinational financial firms driving demand, often outside of their traditional marketplaces


CHICAGO, Oct. 19, 2011 – The U.S. and select international commercial office real estate markets continued to improve in the third quarter of 2011 with vacancies falling and rents increasing marginally. A lack of job growth and remaining economic uncertainty, however, could cause a slowdown in absorption rates in the near future.

“We’re still waiting to see how this all plays out, but for now our landlord representation group is capitalizing on the choppy conditions and leasing space,” said Gregory Green, President of Agency Leasing at Jones Lang LaSalle.

The U.S. office market absorbed approximately 9.4 million square feet of space in the third quarter of 2011, bringing the year-to-date total to more than 24.5 million square feet, eclipsing 2010 levels by more than 75 percent. Vacancy levels continued to decline, falling 30 basis points to 17.8 percent in the third quarter, while rents increased marginally. However, concessions have ticked upwards for the first time in several years, illustrating that landlords are increasingly trying to lure tenants.

Jones Lang LaSalle experienced its own growth in the third quarter, as well: The firm added 10.8 million square feet of landlord representation assignments, 3.9 million square feet of new property management assignments and 1.6 million square feet of joint landlord representation and property management assignments.

The firm has also expanded its team with eight new landlord representation hires and 31 property management professionals in the third quarter, bringing the year-to-date total hires to 27 and 327 respectively.

“Conditions are improving and the marketplace is competitive,” said Dan Pufunt, President of Property Management for Jones Lang LaSalle. “It’s necessary to have a robust and strong team in place to manage through the market conditions.”

The industries driving growth in certain regions across the country and the globe are creative and professional services/media, technology, and multinational financial firms. New York of course continues to cater to financial service firms with six out of the top 10 leases in Downtown being within the financial services segment. The media and technology sectors, however, are picking up steam.

“The diversification of tenants in New York, outside of the financial service industry, is being led by the media industry,” said Peter Riguardi, President, New York Operations at Jones Lang LaSalle. “The other industry seeing growth is technology. Although tech companies have been in New York for quite some time, their primary purpose was for banking relationships and media connectivity. We are now seeing the tech companies expand here by adding programmers and engineers.”

The London office market, a traditional financial services hub, has also seen a pickup in activity from the telecommunications, media and technology sectors, which accounted for 15 percent of total occupier take-up in Central London, said Neil Prime, Head of Office Agency Leasing UK at Jones Lang LaSalle. The services sector as a whole accounted for 43 percent of tenant demand.

“London will remain the key global financial center,” Prime said. “However, with the threat of over-regulation of the financial services arena and ongoing economic issues in the Eurozone, there is a medium-term risk to its competiveness. That, coupled with the growth opportunities of the Asia Pacific region, could lead to the financial services sector focusing much of their investment and expansion away from mature existing markets in the short term. In the meantime, we will see occupier demand in London driven by the services sector, and we can expect to see that continue for the next 12 to 18 months.”

While London is expected to retain its premier financial center status, Asia Pacific is seen as a “growth engine” with global financial firms getting positioned for growth in the region in the medium to long term, said Kevin George, Australian Head of Leasing at Jones Lang LaSalle.

The expansion of international financial institutions in the Asia Pacific region is particularly taking hold in Hong Kong. Its office market has been dominated by the expansion of the multinational finance sector over the last five years, said Gavin Morgan, Deputy Managing Director and Head of Leasing at Jones Lang LaSalle Hong Kong.

There has been an influx of hedge funds and private equity groups into the Hong Kong office market looking to expand in the region. The agenda of the Chinese government to position Hong Kong as an offshore clearing center for the Renmibi (RMB) has led to a fast accumulation of RMB deposits, which will continue to grow as a significant proportion of assets held in Hong Kong.

“This represents huge opportunities for wealth management business, increasing Hong Kong’s importance as an international finance center,” Morgan said. 

Still, a heightened sense of uncertainty remains worldwide, making forecasting what lies ahead, even in the short term, challenging.

“Employers are being very cautious and deliberate about their hiring and business expansion plans right now,” Green said. “Until the cloud lifts off the economic outlook, we will continue to expect a slow recovery.”

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 200 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 $45.3 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.