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Shanghai

Demand for office space in Asia Pacific subdued, as corporates remain cautious

Jones Lang LaSalle releases Q1 2013 Asia Pacific Office Index


Leasing activity in Asia Pacific’s Tier 1 office markets remained generally subdued in the first quarter of 2013, according to real estate advisory firm Jones Lang LaSalle, in its latest Asia Pacific Office Index.  
Whilst take-up of grade A office space contracted in Singapore, Hong Kong, Australian cities and Beijing, it was steady in Japan, South Korea and emerging Southeast Asia; strong demand in Manila and Jakarta was actually constrained by a lack of available space.

Jeremy Sheldon, Managing Director, Markets, said: “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. There is a keen focus across all industries on better space utilisation, which if anything will to add to this "lag". This slowdown is being affected by both international and domestic firms, who, until recently had been a big component of the take-up. Companies remain very cautious in forecasting their space needs.”

Net effective rents in the first quarter of 2013 were flat or grew only modestly across the region; of the 27 featured markets in the Jones Lang LaSalle Index, 14 saw a quarterly increase and the remainder either stabilised or declined. Aggregate rental growth across the region averaged 0.3 percent quarter on quarter, compared to 0.4 percent in Q4 2012.

Jakarta saw the largest quarterly rent increase (7.4 percent) due to a lack of quality space in the market, and increases of between one and four percent were seen in other emerging Southeast Asian markets (Kuala Lumpur 2.3 percent and Bangkok 4.1 percent).

In China, rents were broadly flat across the Tier 1 cities, with Shanghai and Guangzhou seeing mild rental growths of less than 1% on a q-o-q basis. Beijing, where rents have doubled over the last three years and also a strong performer in 2012, saw the largest quarter on quarter rental decline in 1Q13 (-3.7 percent) as leasing activity slowed markedly. Rents declined further in Hong Kong (-1.3 percent) as landlords at the top end of the market have remained under pressure, although rents in Singapore stabilised for the first time since 3Q 2011. Effective rents fell in most Australian cities, by one to three percent, with the biggest quarterly fall of 3.3 percent in Perth.

Dr Jane Murray, Head of Asia Pacific Research, Jones Lang LaSalle commented:  “Landlords are taking a cautious stance on asking rents and we expect corporate occupiers to remain reluctant to pay higher rents.  We do however expect the market to become more favourable to landlords after mid-year as regional economic growth gradually picks up. Whilst we think that rental growth will be limited in most markets in the short term, 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.”