Office leasing grows in Asia-Pacific and Bangkok

The research shows that office rents in the Asia-Pacific region recorded slight growth as demand remained stable and vacancies declined further. 

In the third quarter, the office leasing momentum generally remained steady across the region. The APAC Office Rental Index increased by 0.93 per cent quarter on quarter, a slightly faster rate of growth than the 0.8 per cent recorded in the second quarter.

Annual growth stood at 2.9 per cent year on year, the fastest rate since the first quarter of 2012, with Manila and Singapore seeing strong growth. 

As the year comes to an end, office-leasing activity in the region will remain stable. The APAC Office Rental Index is projected to strengthen by 4 per cent this year, and growth is set to continue into 2015. Singapore will continue to stand out as one of the top performers in the region, along with strong growth expected in Japan.

 Net absorption in Asia fell by 17 per cent quarter on quarter to 790,000 square metres, but this should not be an indication of a slowdown in office-leasing momentum, as the total net absorption rose 34 per cent year on year to 2.6 million square metres. 

Tokyo, which recorded the strongest demand of any market in the second quarter, saw net absorption temporarily turn negative in the third quarter because of the addition of backfill space. Seoul also recorded negative net absorption for the second consecutive quarter.

 CBRE Thailand’s executive director and head of office services, Nithipat Tongpun, said new letting transactions in the third quarter rose by about 60 per cent from the previous quarter and inquiries also increased by about 80 per cent. 

“We believe the increase in leasing activities was a result of companies becoming more confident in the political situation in Thailand,” he said. 

In addition, the net take-up picked up by 28 per cent quarter on quarter. Based on the office market condition and given the stability in the political situation, CBRE expects further growth in demand for office space in Bangkok.

CBRE Asia Pacific’s regional managing director and head of brokerage services, Manish Kashyap, said the office sector would continue to witness moderate expansionary demand, driven by domestic companies or Asian-based occupiers replacing multinationals as tenants in core areas. This can be seen in Hong Kong, where firms from mainland China are taking up space vacated by foreign occupiers. 

Even though they still see the Asia-Pacific region as their key focus for business growth in the long term, multinationals are generally implementing cost-effective solutions by moving to decentralised areas or outsourcing. CBRE expects to see steady activity in the traditional banking sector, but demand from the technology, media and telecoms sector will also remain strong. 

Looking ahead, a significant increase in new office supply will lead to more focus on tenant retention. Emerging markets such as Jakarta and Beijing will see a supply peak, forcing landlords to be more flexible towards rental negotiations. 

Elsewhere, an increasing number of large new projects are expected to be completed in 2015 in Brisbane, Melbourne and Sydney, ensuring they remain tenant markets. 

These trends will put tenant retention as a top priority for landlords in the near future, Kashyap said.