Commercial real estate booming

Commercial real estate markets in key cities around the world are booming as globalization pushes the economies of large international cities to behave more like each other and less like their geographic neighbors, according to a report released Tuesday by real estate services firm CB Richard Ellis Group Inc. "Let's say London and New York as financial industry-centric markets will have more to do with each other than say New York and Philadelphia," said Ward Caswell, U.S. Director of CBRE Research. All 10 global business centers now have vacancy rates below 10 percent, a milestone in the ongoing worldwide recovery of commercial real estate, according to the survey. "This is the first time I can identify that they've been this much in sync," said Caswell, who has followed global real estate markets since the late 1970s. Globalization of trade and borderless movement of money have allowed these key cities to rebound in tandem relatively quickly from the real estate decline that followed the technology bust in 2000. The diversified economies of these cities will allow them to survive better when the markets are not so rosy, Caswell said. "That's the key to these markets both in terms of their strength in growing demand now, but also in terms of how they will fare in a continuing global economy," Caswell said. HONG KONG LEADS THE WAY Hong Kong, which was hit by the dotcom collapse and suffered another blow after the SARS outbreak in 2003, has rebounded quickly and strongly. The city saw asking rents shoot up 37 percent in the past 12 months to an average of $69.12 per square foot as the vacancy rate fell to 4.1 percent from 6.2 percent a year earlier. By mid-year Tokyo's vacancy rate of 0.6 percent was down from 2.2 percent and spurred a 12 percent jump in average asking rent to $148.17 per square foot. London asking rent rose 17 percent to an average of $163.23, and Madrid also logged a 17 percent increase, to a $43.18 average. London and Madrid vacancy stood at 5.7 percent and 8.2 percent respectively, at mid-year 2006. In Paris, asking rents rose to $80 per square foot, up 5.1 percent, while vacancy stood at 4.8 percent, down 0.7 percent. In North America, Toronto asking rents rose 9 percent to an average of $24.58 at mid-year, as vacancy rates slid to 5.2 percent from 8.4 percent at mid-year 2005. New York registered a 7 percent increase in asking rent to an average of $47.30, and vacancy fell 1.8 percentage points to 6.3 percent. Washington, which was the only major U.S. city to thrive after the dotcom bust, saw asking rents rise $45.50, up 0.6 percent. Despite a tremendous rise in development, vacancy continued to fall, down 0.6 percent to 7.3 percent. Los Angeles has seen its vacancy rate drop sharply, down 4.6 percentage points over the past year to 9.1 percent, the first time in 20 years that the average vacancy rate was in the single digits. At 9.4 percent Sydney's mid-year 2006 vacancy rate also is in single digits for the first time since 2003.