9 out of 10 Key Global Cities “Very Likely” to Raise Office Occupation Incentives in 2021, says Savills
December 2, 2020 – Incentives for office occupancy are very likely to increase across nine out of ten key cities in the world, as more landlords are willing to be flexible to support a post-pandemic recovery.
A recent study of the prospects for office occupation, Savills said all key cities — including Berlin, Dubai, Hong Kong, London, Mumbai, New York, Paris, San Francisco and Singapore — are expecting these incentives to come in the next six months.
Shanghai is the only city that will not raise incentives in the near-term, as it has already seen incentives significantly increase in recent quarters
Savills’ views are based on the expert opinions of their head researchers in 10 key office
markets around the world surveyed as part of its Impacts Research programme.
“The views of our researchers around the globe confirm, unsurprisingly, that momentum lies with tenants at the moment with good incentives on offer across the vast majority of markets, and most landlords being prepared to be flexible,” Sophie Chick, Director, Savills World Research said.
“However, this shouldn’t be taken as a sign that tenants will be able to set all the terms: for the best space, rents remain robust and, with many key CBD markets already seeing record-low vacancy rates as we came into 2020, competition for high-quality, well-located offices remains fierce.”
Towards the latter part of 2021, however, only seven out of the cities expect more landlords to offer even more flexible lease terms. Berlin, Hong Kong and Shanghai expect the proportion of landlords offering these terms to stay the same.
Jeremy Bates, head of occupational markets EMEA, Savills, also said that the flexibility from landlords is not expected to stay for the longer-term.
“We would expect more equilibrium to return as markets begin to recover, which with the development of a vaccine may come mid- 2021,” Bates said.
“Tenants should also remember that incentives are not just about rents and can come in different forms, so it is worth having broader discussions over what can be negotiated once you find your preferred space, rather than concentrating on the headline numbers,” he added.
In their per country assessment, most key global cities are expected to see downward pressures in their office space rentals as supply continues to overtake demand. This is apart from London, where increased demand for the office market and fewer development completions were seen in 2020, and some areas in Paris’ inner city where prime rents are expected to stabilise.