Lowest Level of New Stock Since Q4 2006
16 May, 2013, Hong Kong – Asia Pacific rental rates remained stable in Q1 2013 on the back of cautious occupier behaviour and the subdued economic outlook. Net absorption totalled 7 million sq. ft., the same figure as the previous quarter. Japan witnessed a noticeable improvement in occupier sentiment following the election of the Liberal Democratic Party, while Hong Kong was the only market to record negative absorption due to the release of sizable secondary space in the market.
The CBRE Asia Pacific Office Rental Index —which tracks office rental growth for the region—recorded marginal growth of 0.05% over Q3 2012, reflecting the relatively flat rental cycle found for the past six quarters. Rental performance across the region continued to diverge with Bangkok and New Delhi recording strong rental gains, while others such as Bangalore and Mumbai witnessed declines.
Asia Pacific Office Rental Index
Source: CBRE Research
Overall, the Asia vacancy rate declined by 31bps q-o-q to 9.78%. Across the region, vacancy declined in 13 markets, increased in four and one was flat. Notably, Hong Kong witnessed a rise in rates to 3.3%, largely due to space returning in the market, while vacancy notably fell in Kuala Lumpur, amid strong expansion activity in the oil & gas and financial sectors. In Tokyo, vacancy has continued to decline since last quarter due to increased activity by manufacturers, along with Singapore whose vacancy has fallen by 70 bps to 5.1%, the lowest level since Q3 2008.
Asia Pacific Vacancy Rate
Source: CBRE Research
Amidst moderate demand, 6.3 million sq. ft. of new office stock was completed this quarter; a figure well below the 11.1 million sq. ft. completed in Q4 2012. The figure is the lowest level of new stock recorded since Q4 2006 but roughly in line with the long-term average of 7 million sq. ft., and is largely due to project delays in China and India.
Vacancy Rate & Space Under Construction
Source: CBRE Research
”Rental growth is expected to remain flat due to continued caution by occupiers in the short-term. Leasing activity will largely be geared around cost saving, with a focus on consolidation and relocation,” Dr. Nick Axford, Executive Director and Head of CBRE Research, Asia Pacific commented. “Domestic and regional conglomerates will continue to account for the majority of leasing transactions.”
John Falkiner, Managing Director of Transaction Services, Asia also commented: “We expect to see steady leasing activity in most markets over the next quarter and demand should recover slightly in the second half of the year with the exception of key markets such as Singapore, Beijing, Melbourne and Sydney. Further, we expect to see upgrading activity in markets such as Tokyo where rents have bottomed out.”
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