_Sustained growth momentum for Asia-Pacific prime office markets - Q4 2017
In 2017, solid economic performance in Asia-Pacific helped boost the prime office sector as more leasing activities were recorded in selected markets. At the same time, the year has also seen continued growth in demand from co-working spaces and technology-related companies.
Looking into 2018, according to the IMF, Asia’s real GDP is projected to grow by 5.5%, similar to the expected 5.6% growth in 2017, which is likely to maintain momentum in the prime office markets.
Year-on-year, Sydney recorded a 6.9% prime rental increase in 2017 – the highest in all Asia-Pacific markets tracked in this index. In the four major Australian cities, Brisbane was the only market with rising vacancy rates in Q4 2017.
Melbourne experienced its first ever quarterly decrease since Q3 2012, albeit a meagre 0.2%. Rents in Perth remained stable as vacancy rates had been recovering slowly over the past few quarters.
Manila’s office sector successfully rose above market uncertainties in 2017 as the BPO industry continued to drive the performance of the local office sector. Despite a 3.8% quarter-on-quarter increase, prime rents in Jakarta is expected to be tenant-favourable for at least the next 24 months.
Amidst strong demand with rising rents and low vacancies, the outlook in Bangkok remained positive. Vacancy rates in Phnom Penh continued to drop as more multinational companies moved in to newly-completed prime office spaces.
In Taipei, with no new Grade-A office supply in Q4, rents increased slightly, along with the absorption of existing stock. However, the vacancy rate is expected to increase along with the launch of new office towers, but rents should remain stable.
Shanghai’s Grade-A office rents remained stable, while the vacancy rates edged downward due to increasing demand from co-working companies for Grade-A space.
Prime rents in Hong Kong continued to rise in 2017, with Admiralty and Sheung Wan recording the largest growth among districts on Hong Kong Island, up 11% and 9% year on year respectively.
Central’s rents will rise 2-5% in 2018 with limited supply and sustained demand. Stock in Pazhou and International Finance City in Guangzhou will increase rapidly in 2018, which will push up the vacancy rates and impose downward pressure on rents.
The office market in Singapore showed continued signs of recovery in Q4 2017, with active leasing activity gathering pace. A stronger performing economy did not help Kuala Lumpur office market as it continued to struggle with an oversupply of new buildings and subdued leasing activities.
Seoul office market suffered a 1.9% decline quarter-on-quarter but for the full 2017, the city still posted a 4.3% increase. Prime vacancy rates in Tokyo continued to slide for the third consecutive quarter, down to 1.6% as at the end of last year.
Occupiers in Mumbai were impacted in 2017 on account of implementation of GST and slowdown in consumer demand. As a result, the corporates focused their attention on getting themselves GST compliant and held back on expansion plans.
In Bengaluru, the IT/ITeS, e-commerce and co-working sectors remained the important demand drivers in H2 2017. Office project delays in NCR resulted in an all-time low in completions – only 4.1 million sq ft of new completions hit the market in 2017, registering a striking 65% decline from the peak in 2015.
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