Office rents in Asia-Pac cities steady in Q1

S'pore rents up 0.5% but upcoming supply will weigh down on market, says Colliers

OFFICE rents across most Asia Pacific cities rose or stayed flat in the first quarter, indicating that the worst may be over for the commercial market, said Colliers International in a report yesterday.

The property consultancy found rents in Singapore going up by 0.5 per cent in Q1, reversing a 0.3 per cent dip in Q4 last year.

The improvement prompted it to predict a 5 per cent increase in rents from Q2-Q4.

Multinational corporations in Asia Pacific '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', Colliers said.

'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.'

Of the 25 cities which Colliers studied, 16 posted higher office rents in Q1, compared with just five in the preceding quarter.

Occupancy costs in Hong Kong climbed 5.1 per cent in Q1, exhibiting the largest percentage increase in Asia Pacific. They had risen 2.4 per cent a quarter ago.

There were more leasing enquiries and 'landlords were emboldened to raise asking rentals', Colliers noted.

It expects rents in Hong Kong to surge 20 per cent in the next 12 months because of the limited supply of new stock in core locations.

Colliers acknowledged that the upcoming supply of almost two million sq ft of new office space in Singapore will weigh down on the local commercial market.

But companies have committed to take up more than 80 per cent of this, it said.

And when these firms relocate, 'company expansions and formations - on the back of robust economic growth foreseen for 2010 - will help to mitigate this', Colliers said.

Colliers added that Singapore might see spillover demand from Hong Kong should rents there shoot up as expected.

Across Asia Pacific, Tokyo remained the most expensive place for offices, even though occupancy costs had dropped 1.8 per cent quarter-on-quarter.

They were US$98.35 per sq ft per year in Q1.

Hong Kong ranked second highest in occupancy costs, which hit US$82.96 psf per year.

Singapore came in third with costs of US$54.58 psf per year.

Source: Business Times, 4 May 2010