Singapore leads office rental growth in Q1
Singapore, along with China and India, has led the growth in office rentals and demand for office space in the Asia Pacific in the first quarter, according to CB Richard Ellis (CBRE).
The increasing pressure on prime rents across the Asia Pacific region continued its upward trend in the first quarter, as CBRE's Asia Pacific Office Rent Index rose 3.0 percent, slightly lower than the 3.6 percent recorded in the previous quarter. Singapore and cities in Greater China led the growth, both in terms of expansionary demand and rental appreciation.
According to CBRE, the Singapore office market recorded a more measured start this year, as occupiers digested the significant expansion space taken up last year. Though average rents in prime office space continued to rebound, the pace of rental growth moderated to 3.6 percent quarter-on-quarter, from 12.2 percent in the previous quarter. Average monthly rents for prime office location stood at S$8.60 psf in the first quarter.
Completion forecast for 2012 has been lowered to 1.4 million sq ft from 2.1 million sq ft, as many developers rescheduled the launch of their new projects.
Meanwhile, vacancy rate remained down in almost all Asian markets during the review period. Overall vacancy rate for 16 Asian markets declined 90 bps quarter-on-quarter to 10.3 percent in the first quarter. Occupiers were particularly active in absorbing space in Singapore, China and India, with China alone accounting for more than 50 percent of the additional demand for office space recorded in the first quarter in the Asia Pacific.
"The trend towards corporate expansion and consolidation is leading some occupiers to seek options outside of CBD's or in City Fringe locations," said Nick Axford, Head of Research for Asia Pacific at CBRE. "This is particularly the case in Hong Kong, but major occupiers with limited large short term options are also looking outside Australian CBD's as well."
Overall, office completions in the Pacific are currently going through a lean period, following the global financial crisis. However, many Asian cities are anticipating the possibility of oversupply in upcoming quarters, with several pipeline projects opting to delay their completion in order to avoid over-competition for tenants.
Although the Japan disasters and natural calamities in the Pacific have weakened business sentiment and dampened industrial production in the affected markets, it is unlikely to slow the pace of corporate expansion elsewhere.
"The supply pressure in these markets is expected to offset the effects of growing expansionary demand, either limiting or balancing out rental growth in some cases," said Nigel Smith, Executive Director for Landlord Project Services Asia.
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