Premium office rents in Asia Pacific increased 0.5 percent in the third quarter of this year with Melbourne, Sydney and Hong Kong registering the best performance.
“There was a marked shift in the pattern of rental growth as subdued growth in many Asian markets was offset by robust rent uplifts in key Australian markets,” says Dr Megan Walters, Head of Research, Asia Pacific at JLL who produce the firm’s Global Office Index
“We are optimistic that regional leasing volumes for the full-year 2016 will remain largely in line with last year’s level. Financial and technology firms continue to be the key drivers of demand across many office markets, while the oil and gas industry further downsizes,” she says.
The top Asia Pacific performer in the third quarter was Melbourne, where rental prices of Grade A office space were up 5.7 percent quarter-on-quarter, due to demand from sectors including information technology and professional and financial services.
Professional services firms played a notable part in sustained strong rental growth in Sydney as rents climbed 5.5 percent. Meanwhile, demand from mainland Chinese financial companies helped to drive Hong Kong rentals up 2.2 percent.
Business process outsourcing contributed to healthy rental growth in Manila, where rentals climbed 2 percent while broad-based demand saw Mumbai rents increase 1.3 percent quarter-on-quarter.
In Tokyo, rental values were little changed as high pre-commitment rates for recent completions were offset by a large volume of upcoming supply and declining leasing. A moratorium on new peer-to-peer business registrations and caution among lenders contributed to a 0.6 percent fall in Shanghai rents.
Ongoing weakness in the South Korean economy along with large corporates optimising their real estate portfolios saw rentals in Seoul slip 1.5 percent.
Singapore rents were down 2.1 percent due to supply pressure and weakness in the banking sector; however, the pace of decline has slowed from previous quarters.
Downsizing from the oil and gas sector affected rental growth in Jakarta and Kuala Lumpur where rents were down 2.5 percent and 0.9 percent respectively.
“In spite of lingering headwinds related to a slow and patchy global recovery, strong domestic demand should see the Asia Pacific economy continue to grow at a respectable pace of around 5 percent through end-2017. This will help to underpin growth in leasing markets,” says Dr Walter.
Rental performance in key Asia Pacific cities.
- Melbourne (+5.7 percent)
- Sydney (+5.5 percent)
- Hong Kong (+2.2 percent)
- Manila (+2 percent)
- Mumbai (+1.3 percent)
- Tokyo (unchanged)
- Shanghai (-0.6 percent)
- Seoul (-1.5 percent)
- Kuala Lumpur (-0.9 percent)
- Singapore (-2.1 percent)
- Jakarta (-2.5 percent)
Dr. Megan Walters
Head of Research. Asia Pacific, JLL