Demand for office space to grow in line with Asian economies

The property consultancy’s Prime Office Index rose for the 12th successive quarter, increasing 1.7 per cent in the January-March period of 2013 and 5.6 per cent over the last 12 months. Fifteen of the 19 prime office markets tracked saw prime rents increase in the first quarter.

Bangkok rents showed steady growth of 2.6 per cent.

Rents are expected to soften in only three of the 19 markets monitored over the next 12 months.

The Asia-Pacific vacancy rate increased marginally to 12.0 per cent as positive net absorption across most markets was met with significant new supply.

Tokyo led the way in terms of rental growth, where Grade A office rents increased over the quarter by nearly 16 per cent, although still sitting 39 per cent below the peak of the first quarter of 2008.

In China, despite a drop in growth levels in the first quarter of this year, the movement to more domestic demand in the country is likely to lead to more stable but lower growth rates over the coming years. The Beijing office market remains tight, although it has likely passed its mid-term peak, while the Shanghai market is likely to continue to become more tenant-friendly as the city welcomes nearly 2.5 million square metres of new supply over the next three years.

In Southeast Asia, prime office rents fell for the seventh successive quarter in Singapore, while the Vietnamese markets have likely hit the bottom of the cycle after more than four years of declining prime rents. The Kuala Lumpur prime office market remained steady, with a possible boost in demand after the recent Malaysian election tempered by significant new supply. 

Jakarta continued to see the strongest growth in prime office rents in the region. 

More broadly speaking, increasing Asean integration over the coming years is set to boost domestic economies and office markets in the region.