Improved economic sentiments support growth in select office markets in Q1 2017
Bangkok remained the strongest performer on the index, recording both the highest quarter-on-quarter (3.1%) and year-on-year (9.6%) growth rates in Asia-Pacific. Rents have been on the rise for more than two years and are expected to persist due to strong absorption amidst tight supply.
Mr. Marcus Burtenshaw, Executive Director and Head of Commercial Agency, says, “Despite a generally unremarkable macroeconomic climate, strong growth in Thailand’s service sector in Thailand is leading to what seems like unceasing demand for office space, pushing rents ever higher. Faced with the reality of higher rents, tenants are increasingly demanding more from their buildings. The requirements are not limited to good access to mass transit, grand lobbies and high ceilings. Tenants want more natural light, improved security systems, and quality food outlets that caters to the budgets of all of their employees. Looking ahead, supply side lag and a growing service sector means that this climate of rising rents is likely to continue for some time to come”.
Knight Frank, the independent global property consultancy, today launches the Asia-Pacific Prime Office Rental Index for Q1 2017. This quarter, the index sees the addition of Manila, bringing the total number of markets tracked to 20. For Q1 2017, the index grew 1.0% quarter-on-quarter due to rising rents in 10 of the markets over the quarter, with rental declines experienced in five of the 20 markets tracked.
Results for Q1 2017
- Bangkok remained the strongest performer on the index, recording both the highest quarter-on-quarter (3.1%) and year-on-year (9.6%) growth rates in Asia-Pacific. Rents have been on the rise for more than two years and are expected to persist due to strong absorption amidst tight supply.
- Both Tokyo and Manila tied at the bottom of the index with a 1.1% decline quarter-on-quarter.
- In Tokyo, vacancy rates for prime space have been increasing as Tokyo’s office market comes off its peak.
- Despite a decline this quarter, Manila’s office rental take-up has been robust against the backdrop of its strong economy – rents were on a rising streak over the last 15 consecutive quarters up till Q1 2017.
- Mainland Chinese companies remained the most important source of new take-up in Central of Hong Kong (2.5%) Island, as landlords stayed aggressive due to limited supply, thus further pushing rental levels upwards.
- Over the next 12 months, Knight Frank expects rents in 15 out of the 20 tracked cities to either remain steady or increase, up from 12 in the previous forecast.
Mr Nicholas Holt, Head of Research for Asia-Pacific, says, “US political uncertainty, rising interest rates and Chinese capital controls all made waves during the first quarter of 2017. Amidst these uncertainties, however, global economic activity continued to gain momentum.
“With a moderate rise in commodity prices and improving market sentiment, these positive elements bode well for several Asia-Pacific prime office markets for the rest of the year.”
Asia-Pacific Prime Office Rents
Source: Knight Frank Research / *Sanko Estate