Corporate occupier activity robust across major real estate markets

Global corporate occupier activity continued at a strong pace in the second quarter of 2018, with co-working and flexible space providers, tech firms and finance companies leading demand. Office leasing volumes in Asia Pacific were at the highest levels for more than a decade in the second quarter of 2018, while net absorption rose by 67% compared to the same time last year, as business sentiment remained positive across the region. Occupational demand was broad-based across domestic and international corporations.

Occupational activity in the major U.S. markets also remained strong. Despite unemployment at record lows, hiring activity remained robust, driving absorption of over 5 million square feet last quarter. A wave of urban migration is occurring in many U.S. cities as companies move from obsolete suburban campuses and continue their push into more vibrant and amenity-rich urban cores. This is happening across the country, with Midwestern and Central markets acting as the poster child for this trend.

Leasing activity across Europe was higher than forecast, with major markets in Germany defying predictions of slowing demand, while Central and Eastern Europe saw elevated leasing activity in the second quarter. A positive outlook for employment in many markets across the region is contributing to tighter labour markets and supporting an increased focus on experience and workplace design as a differentiator for employee attraction and retention.

Rise of flexible office space continues unabated

Co-working and flex space expansion continues across all major markets. This rapid growth is being driven by the evolving nature of work and the shifting structure of the economy, supported by rapidly advancing technology. Corporate attitudes are also changing, with an increased emphasis on flexibility and agility.

Flexible space providers accounted for more than 35% of all U.S. leasing activity over the first half of 2018, with growth also seen across major Asia Pacific and European markets. Amid all this demand from co-working firms, it’s important to note that flexible space providers are not really end users. They represent a change in how real estate is consumed, but this growth is underpinned by a broad economic base of SMEs and larger enterprises of all types. Growth in flexible space provision is anticipated to continue as the market adjusts to this structural shift in the way businesses use office space.