How does the crisis impact living and business activities in city centres?
The economic crisis has been catastrophic to many cities. Rising unemployment has lead to social unrest, increase demand on welfare systems, and a decrease in the demand for real esate both commercial and residential.
Impact of the recession on city office occupancy
Due to the higher cost of operating in city centers, companies chose to settle their office outside the city. For example, Taipei’s prime commercial-property vacancy rate will climb to a record this year as tenants move out of the city center and public transport improvements make suburban locations more attractive, according to Jones Lang LaSalle Inc. HP will move most of its workers, which include engineers, administration and procurement teams, from different locations in central Taipei to a single location in outer Taipei’s Nangang District by the end of the year. (Bloomberg, 07/07/2010)
In North America, office vacancies beat record. PhillyDeals reports that the office vacancy rate in Philadelphia Center City has risen dramatically in the past few years, according to reports from two commercial real estate firms. According to the firm Studley Inc.: "Center City office vacancy rate has topped 15 percent, the worst since 2004, according to data collected by Studley Inc., the national tenant-rep firm." And the firm CB Richard Ellis Group Inc. "estimates the Center City vacancy rate at about 14 percent, the highest since 2005. (entire article in http://philly.brownstoner.com/2010/08/center_city_office_vacancy_rat.php)
Overall the U.S. office vacancy rate rose to 17.2 percent, a level unseen since 1994, as the market lost about 11.6 million net square feet of occupied space during the first quarter, according to the report released on Monday Apr 5, 2010, by Reis Inc (Reuters).
Same pattern is seen in Europe : the office property market in London was ravaged by the global financial crisis in 2008, as more than one-in-ten premises were left vacant and rental rates fell 19% in 2009. Vacancy rates rose from 9.6% at the end of September 2008 to 11% by the end of December 2008.
According to Jones Lang LaSalle’s Q2 2009 European Office Clock Report prime office rents declined by 4.6% over the quarter, and now stand on average 15.4% lower then Q2 2008. The Index, which is based on 24 markets, shows that Moscow witnessed headline rental falls of 30%, followed by Dublin (-18%) and Madrid (-10%) over the quarter. London has experienced a year-on-year fall in prime rents of -32% and potentially has now reached the peak of rental decline. The overall European vacancy rate increased 80 basis points to 9.3%.
http://www.propertywire.com/news/europe/london-office-vacancy-rise-200901122386.html http://philly.brownstoner.com/2010/08/center_city_office_vacancy_rat.php http://www.bloomberg.com/news/2010-07-07/taipei-s-prime-office-vacancies-rate-will-continue-rising-jones-lang-says.html http://holland-real-estate.com/system/main.php?pageid=2616&articleid=14480