Rents for office space in Hong Kong and Singapore increased during the second quarter of the year for the first time since 2011, according to the latest Jones Lang LaSalle office index.
Rents in Singapore increase by 0.6 percent from the previous quarter while Hong Kong reported a 1.5 percent increase. Jakarta's office market led the region with a 9.8 percent quarterly increase and a 37 percent annual increase.
However, only 14 of the 27 markets in the region reported increases while the rest stabilized or declined, with aggregate rental growth increasing by only 0.2 percent from last quarter, JLL reports.
"The demand for office space has remained slow throughout the second quarter of this year," Jeremy Sheldon, managing director, markets, at Jones Lang LaSalle, said in the release. "While we have seen some renewed activity from local corporates and specific sectors such as pharmaceutical and technology, there is still an overriding emphasis on maintaining costs.
"That said, for many markets the supply side remains tight which has kept rents relatively flat."
Rents increased in Tokyo, Seoul, Shanghai, Manila and Bangkok during the second quarter. Beijing reported a 1.6 percent decrease after falling 3.7 percent during the previous quarter. Most Australian cities recorded rent declines with Melbourne reporting the largest quarterly decline in the region, dropping 6.4 percent, followed by Sydney, Brisbane and Perth.
For the remainder of the year, JLL expects corporate occupiers will remain reluctant to pay higher rents.
"We expect only single-digit rental growth during the remainder of the year with the biggest uplift likely to take place in Jakarta while some markets, such as Beijing, Sydney and Melbourne, may experience further slight declines," Dr. Jane Murray, head of Asia Pacific research, JLL said. "Similar to this quarter's activity, continued interest from investors will drive capital values to increase faster than rents, resulting in yields holding firm or compressing further in most markets across the region."
Jakarta was again the region's leader in capital values, increasing 10.2 percent during the quarter, while the region reported a 1.7 percent increase quarterly growth and a 6.8 percent year-over-year increase in capital values.
Most markets in the region reported slow take-up of grade A office space, especially in the financial centers of Hong Kong, Singapore, Tokyo and Sydney. On the other hand, emerging markets in Southeast Asia reported steady take-up during the second quarter, the firm said.