Rental growth worldwide was subdued during the first half of the year on the back of uncertain economic conditions, especially in Europe and China, revealed a DTZ Research report.
“The global picture for the first half of this year is showing that most global corporations are waiting to see whether the global economic recovery will provide a sustained demand for their goods and services before they commit to expanding their office space,” said report author Milena Kuljanin, an analyst at DTZ.
The slowdown in China saw weakened economic demand across Asia Pacific, with prime office rents rising slightly at 0.8 percent in the first half. However, the Southeast Asia market performed well with rents climbing nine percent in Jakarta.
Subdued rental growth in the Asia Pacific could be due to weak office space demand and the preference of occupiers to commit to affordable office space in the off CBD and suburban micro-markets.
“In Australia, negative net absorption has resulted in increasing incentives for occupiers, causing a decline in effective rents. Our research also showed that the Sydney and Singapore markets have stabilised at a low point, offering tenants excellent opportunities to lock in leases before market rents start to increase again,” said Dominic Brown, Head of DTZ South East Asia & Australia and New Zealand Research.
Meanwhile, Andrew Ness, DTZ’s Head of North Asia Research, said: “Whilst rental growth in China has slowed in recent years, Hong Kong remains the most expensive office market in Asia Pacific. Tokyo experienced 1.3 percent rental growth in the first half of 2013, off the back of growing demand and limited supply. When measured in US dollar terms, Singapore overtook Tokyo as the second most expensive market in the region, due to the depreciation of the yen.”
Moving forward, DTZ expects office markets in the Asia Pacific to achieve “the highest level of rental growth over the next five years of any region globally. This is driven by a stabilising and improving economic outlook and limited new supply putting upward pressure on office rents across the region”.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
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