Demand for office space in Asia rising
Region's rental market bottoming out; Q1 rents slid just 0.1%
By Joyce Teo
OFFICE rentals slid again across Asia in the first quarter of the year, albeit by a whisker, even as the economic recovery gained pace, according to a new CB Richard Ellis (CBRE) report.
But the good news is the market finally seems to be bottoming out in the region, including Singapore where rents are now almost 60 per cent below their peak.
Overall, office rents in Asia slid 0.1 per cent in the first quarter, a much milder fall than the 1.9 per cent in the previous quarter, it said.
'With an increasing number of companies putting in higher real estate budgets to support their overall regional corporate expansion plans, office leasing activity is expected to turn robust in the first half of 2010 and lead rentals out from the downward cycle,' said CBRE Research Asia executive director Andrew Ness.
Already, first-quarter demand for office space was 'robust' in Asia's major commercial centres as firms are now more willing to commit to space at the current rentals, CBRE said.
The report said firms are taking advantage of office rents generally having been lower for over a year in most markets. Some are taking the chance to upgrade to Grade A facilities.
At the same time, overall business sentiment was buoyed by the continued upswing in the regional economy.
The labour market has also tightened, with the jobless rate clearly falling in most markets as larger firms announce recruitment plans, said CBRE.
The overall office vacancy rate in Asian cities fell 0.8 percentage point quarter-on-quarter to 11.8 per cent in the first quarter, it said. Top quality or Grade A offices did better than those in the Grade B market as tenants looked to upgrade to nicer premises and lock in leases with favourable terms while conditions still permit.
First to record rental growth were cities in Greater China, CBRE said. Beijing, Shanghai, Guangzhou, Hong Kong and Taipei all posted quarter- on-quarter growth.
For instance, in Hong Kong, demand is growing amid limited new supply. In fact, rents in the territory's central region surged 9 per cent in the first quarter, the highest rise of all main office districts in Asia, it said.
A report by Colliers International on Monday said Singapore could enjoy spillover demand from Hong Kong, where an office supply crunch is expected to lead to a double-digit percentage jump in office rents this year.
The Republic was still the third most expensive office centre, with Tokyo and Hong Kong in No. 1 and No. 2 spots, respectively, it had said.
CBRE said office rents here shrank for the sixth straight quarter even as the economy powers ahead. But the rate of fall was marginal. Rents appear to be stabilising amid rising demand and the brighter economic outlook.
'We're seeing a very decent level of office leasing activities,' said CBRE's executive director of office services, Mr Moray Armstrong, yesterday. Office rents look increasingly set to rise despite huge impending supply, he said. Rents in better quality buildings are already moving up, but older buildings may take a little longer, he added.
In the first quarter, prime rents fell 0.7 per cent quarter-on-quarter to $6.70 per sq ft a month, and have now shrunk by 58.4 per cent since peaking in the third quarter of 2008.
joyceteo@sph.com.sg
Office rents in Singapore shrank for the sixth straight quarter, says a CB Richard Ellis report, but rates are stabilising amid rising demand. -- ST PHOTO: ALPHONSUS CHERN
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