Office rents across most Asia Pacific cities stayed flat or increased during the first three months of the year, indicating that the worst may be over for the commercial market, according to report by Colliers International.
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The property consultancy firm found rents in Singapore escalating by 0.5 percent in the first quarter of 2010, reversing a dip of 0.3 percent during the fourth quarter of 2009.
The improvement prompted Colliers to predict a five-percent increase in rents from Q2 to Q4.
Asia Pacific’s multinational corporations “have been encouraged by stronger than anticipated economic conditions to re-activate their real estate plans, which had been largely put on hold immediately after the crisis hit,” said Colliers.
“The demand for office real estate in the region continues to gather strength on the back of further economic growth expected over the next couple of years.”
Out of the 25 cities, which Colliers studied, 16 reported higher office rents in Q1, compared with just five in the previous quarter.
In Hong Kong, occupancy costs climbed 5.1 percent in Q1, presenting the largest percentage increase in the Asia Pacific region.
Colliers noted that there were more leasing enquiries and “landlords were emboldened to raise asking rentals.”
The company expects rents in HK to rise 20 percent in the next 12 months due to the inadequate supply of new stock in core locations.
Colliers acknowledged that the upcoming supply of about two million sq ft of new office space in Singapore will weigh down on the local commercial market.
However, firms have committed to take up over 80 percent of this, it said.
According to Colliers, when these companies relocate, “company expansions and formations – on the back of robust economic growth foreseen for 2010 – will help to mitigate this.”
Singapore might see spillover demand from HK, if rents there increase as expected, it added.
Across Asia Pacific, Tokyo remained the most expensive place for offices, although occupancy costs had declined by 1.8 percent quarter-on-quarter.
With an occupancy cost of US$82.96 psf per year, HK came in second spot.
Singapore ranked third highest in occupancy cost, hitting US$54.58 psf per year.