Over the next three to six months, prime office market performance in Asia Pacific is likely to reflect some of the uncertainty surrounding the region’s economy, according to the latest index report from Knight Frank.
The index returned to positive growth in the third quarter of 2013, up by 0.5% following a 0.1% drop in the previous quarter with Jakarta’s premium Grade A office market recording a 28% increase, the highest quarterly growth on record.
Despite this, only eight of the 19 prime office markets tracked saw prime rents increase in the third quarter of 2013 and although rents are expected to continue to rise going forward, the firm expects this to moderate due to new supply and a slowdown in the economy.
New Delhi and Bangalore recorded headline rental increases over the quarter, with the latter leading the way with 2.6% rental growth, driven by the IT sector. In Tokyo, prime office rents moderated slightly for the second successive quarter, although on an annual basis rents increased 25.2%. However, prime Grade A rents remain 40% below their peak in the first quarter of 2008.
China saw rents decline marginally, although prospects for rental growth have increased slightly as the economy grew at its quickest pace this year between July and September. Meanwhile, prime office rents fell across all major city CBDs in Australia, as the country’s muted economy continues to be impacted by the slowdown in the resources sector.
Elsewhere, in South East Asia, Singapore’s prime office market saw rental growth over the quarter, as leasing activity picked up in the second half of 2013. In Kuala Lumpur, the market remained flat, with both rents and vacancy rates unchanged. Bangkok’s prime office rents continued to edge upwards, as the vacancy rate for Grade A buildings fell for the sixth successive quarter.
‘The expectation of tighter monetary conditions are all weighing on growth prospects in the region, which in turn are influencing business office expansions in certain markets,’ said Nicholas Holt, head of research for Asia Pacific.