Asian Office Rental Growth Slows

Asian Office Rental Growth Slows

Commercial News » Asia Pacific Commercial News Edition | By Francys Vallecillo | May 14, 2013 10:23 AM ET

Leasing activity was mostly flat in Asia Pacific's top office markets during the first quarter of 2013, according to Jones Lang LaSalle's latest Asia Pacific Office Index. 

Combined rental growth in the region averaged 0.3 from last quarter, compared to 0.4 percent in the last quarter of 2012. Of the 27 markets in the index, 14 reported an increase while the remainder stabilized or declined, JLL reports.  

Overall, companies are still wary of the amount of space they will need.

"Landlords are taking a cautious stance on asking rents and we expect corporate occupiers to remain reluctant to pay higher rents," Jane Murray, JLL head of Asia Pacific research, said in the report.

Jakarta reported a 7.4 percent rent increase for the quarter, the largest in the region, while increases between one and four percent were reported in other emerging Southeast Asian markets.  Beijing on the other hand reported the largest quarterly rental decline, falling 3.7 percent after being a strong performer in 2012. Rents in Hong Kong fell 1.3 percent, as landlords remain under pressure, JLL reports.   

Rental growth in most Australian cities fell by one to three percent with Perth reporting the largest quarterly fall of 3.3 percent.  

Overall, average rents grew 2.2 percent in the past year, compared with 6.2 percent in 2011. Jakarta posted the largest annual growth in the region, rising 36 percent, with rents almost 150 percent higher than four years ago.  

Australia reported the largest fall of rental growth on an annual basis, declining 4.2 percent.  

Average capital values in the region increased by 1.4 percent during the quarter, the same as the previous quarter. 

"Overall, while business sentiment amongst occupiers is better in 2013 compared 2012 this has not translated into activity as yet - the 'lag' between business optimism and take-up means we are likely to see a pick up toward year end and into 2014," markets managing director Jeremy Sheldon said.

As regional economic growth picks up, markets are expected to become more favorable for landlords.

"We expect single-digit growth for the full calendar year, with rents in Hong Kong, Singapore and Beijing starting to recover in the second half and the biggest uplift likely to be seen in Jakarta," Dr. Murray added.

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