Property Management markets in 2015-2016

Citation

Warren, C.M.J. (2016), "Property Management markets in 2015-2016", Property Management, Vol. 34 No. 2. https://doi.org/10.1108/PM-01-2016-0005

Property Management markets in 2015-2016

Article Type: Editorial From: Property Management, Volume 34, Issue 2.

The global commercial property market seems to be continuing its growth phase despite significant volatility on global stock markets, falling commodity prices and the looming threat presented by slowing growth in China. For the past few years, in my first editorial for the year, I have been reflecting on the office markets over the previous year and the forecasts by the major agencies for the coming year. The growth in the commercial office market has continued throughout 2015 inline with the forecast growth predicted in last years update. Office yields around the world have firming by an average of 26 basis points throughout 2015 (Savills, 2015), and while there still remains considerable variation in prime office yields between the major cities the investment market for quality buildings remains strong.

The firming of yields is, in part, underpinned by a boost in corporate occupier demand for space, JLL (2015) report that as a result of robust levels of global leasing demand, rents on prime office assets across 95 major markets included in the JLL Global Office Index, have increased by 2.5 per cent year on year to Q3 2015. JLL forecast that this rental growth will continue due to an optimistic outlook by corporate occupiers despite concern regarding world economic stability. Growth is forecast to be 4 per cent by the end of 2016 (JLL, 2015).

The healthy prospects for office market demand are also echoed by CBRE in their annual review of Global prime office occupier costs (CBRE, 2015), with global occupier costs increasing by 2.4 per cent in 2015 fuelled by demand for top quality space. Some markets performed better than others with Moscow dropping out of the top ten most expensive markets to be replaced by Shanghai. Most research agencies are reporting the strongest growth in the Asia – Pacific region along with the USA market and selected markets in Europe. London has once again retained its position as the world’s most expensive office market, closely followed by Hong Kong.

All of these forecasts bode well for another busy year for sales and leasing agents and more challenging times for property managers seeking to secure quality office space. Continuing upward pressure on rental rates and declining incentives in some markets will encourage occupiers to get in early to secure available space as major markets move into a tightening phase of available space and vacancy rates begin to fall once again. The message from this seems to be that if there is an opportunity to lock in occupancy costs now, then it would be prudent to do so.

Now to look at this issue of Property Management in which we have the usual line up of high-quality property research from around the world. This issue has papers from Malaysia, Norway, Sweden, Netherlands and Australia. There is also a mix of residential and commercial management papers presented, representing the diverse interests of property managers.

The first paper in this issue comes from Malaysia and is written by Teck Hong Tan from University of Reading, Johor Malaysia. The paper; “Residential satisfaction in gated communities: case study of Desa Park City, Kuala Lumpur, Malaysia” is, as the title suggests, an evaluation of occupiers satisfaction with their property purchase. The study focuses on gated communities and not surprisingly finds that safety and security rate highly as attributes sought by residents. The paper also highlights that good financial returns and a sense of social status are also important to occupiers of these properties.

The second paper comes from a team of researchers led by Minou Weijs-Perree at Eindhoven University of Technology in the Netherlands. They present the paper; “Differences between business center concepts in the Netherlands”. The paper analyses the concept of the “business centre” and provides a very useful literature review which differentiates the business centre from serviced offices or shared office modes of operation. The paper concludes that owners and managers are recognising the benefits of these co-working spaces and embracing the concept in more buildings. This paper gives a valuable insight into the office market in the Netherlands and also highlights some important developments occurring in the market, particularly for space occupied by start-up businesses.

Paper 3 in this issue focuses on maintenance of public assets in Norway. The paper is written by Arnt Hopland and Sturla Kyamsdal from the Norwegian School of Economics in Bergen, Norway. This paper seeks to establish an optimal maintenance schedule which reflects a trade-off between the interest rate and the rate at which asset decay accelerates. It finds that it is sub-optimal to have a cyclical maintenance schedule where the building is allowed to decay and then be intensively maintained before decaying again. This is perhaps self-evident to experienced property managers but it is often the case that governments allow maintenance to accumulate in order to save money with a view to addressing the deferred maintenance at some date in the future. This research will give property managers evidence that this is a flawed strategy.

The fourth paper is written by Timothy Wilson and Lars Lindbergh from Umea University, Sweden. The paper; “Strategic management in Swedish municipal housing: indications of change from owner directives” reports on research to establish if significant changes in management practice has been achieved through Swedish legislation which mandates that public housing companies should run like a business. The paper provides a valuable insight into Swedish public sector housing management and will be of interest to anyone involved in the management of large residential property portfolios.

The final paper comes from Lucy Cradduck from Queensland University of Technology, Australia. The paper is entitled; “After the rains: water’s impact for valuation practices” is a timely reminder that water can have both a beneficial and a negative impact on property value. A pleasant water view or close proximity to beaches and waterways is frequently seen as a significant benefit which is reflected in enhanced value, yet this benefit can quickly be reversed following a significant flood event. The paper draws on the experience of the 2011 floods in Brisbane, Australia to illustrate the valuation changes manifest within the market following a major disaster even. The paper serves as a warning to valuers and purchasers of the risks inherent in building in close proximity to water ways and other potential natural hazards.

I trust that you find the range of research papers presented in this issue of Property Management interesting and informative. This year is looking very positive for Property Management with the flow of high-quality papers off to a strong start, however, quality papers are always in demand and I encourage you to present your research for inclusion in the Journal in 2016.

Clive M.J. Warren

References

CBRE (2015), “December 2015 global prime office occupancy costs”, CBRE Global Research and Consulting, Los Angeles, CA.

JLL (2015), “Global office index, third quarter 2015. Asia Pacific”, JLL Research, Chicago, IL.

Savills (2015), “World office yield spectrum 2H/2015”, Savills, Sydney.