Office space demand strong across Asia Pacific
Print Edition
OFFICE leasing in the Asia Pacific region started well this year amid strong demand in the financial sector, international property advisor Cushman & Wakefield said in a report.
Despite nearly 1.86 million square meters of space being completed in the region during the first three months of 2015, vacancy rates remained well under control, up just 0.4 percentage points to 9.9 percent. In the core markets, demand for space jumped by more than 20 percent, with the insurance sector being a stand-out performer, accounting for over 40 percent of the major leases.
“There is an increased propensity of the new Grade A buildings to lease at a faster velocity than lower-grade projects,” said Michael Stacy, executive director of Tenant Advisory Group, China, Cushman & Wakefield. “New buildings in gateway cities such as Tokyo, Beijing, Shanghai, Seoul and even Singapore are reporting very high pre-leasing rates. A robust pace of construction is driving up availability in second-tier cities in China.”
In Singapore, the completion of CapitaGreen has seen a number of blue-chip tenants moving to the prime grade development while Ace Insurance relocated from a space in the suburbs to take up an office in Seoul’s Gangnam business district.
In Tokyo, Japan Post Insurance is consolidating its employees in Osaki Bright Tower, inking close to 92,900- square-meter lease that will see the yet-to-be completed building fully pre-committed. While tenants are moving to these higher-grade facilities because of very competitive rates and efficient work spaces, organic growth is also an important reason.
With Southeast Asia on the brink of economic integration, insurers are generally upbeat on this region’s prospects. For instance, life insurer Manulife paid US$1.2 billion to local bank DBS for a 15-year exclusive deal to sell its insurance products to the bank’s client base while Berkshire Hathaway-linked Specialty Insurance has obtained a license to operate in Singapore.
“Looking at the employment data for the major cities, we’ve seen the office-leasing sector continuing to expand,” said Sigrid Zialcita, managing director of research for Asia Pacific, Cushman & Wakefield. “In particular, we’re seeing this in higher take-up levels in the financial sector, which has sat on the sidelines over the past quarters. The technology sector also remains very active across the region, with the likes of Apple and Facebook, benefiting from continuing phenomenal financial performance.”
This is especially notable in Australia, as the country adjusts to the shifting economic structure, post mining boom, where demand for office space was the strongest in the non-mining states. Vacancies fell in Sydney, driven by demand across a wide range of companies in the financial, technology and business and professional services sectors. In Melbourne, tenants taking advantage of the softer market are driving absorption in the CBD as they move back into the central business districts.
Overall rents in the region, meanwhile, remained on an upward trend from the last quarter of 2014. From a rental standpoint, stronger occupancies are supporting rental gains in financial hubs. In Tokyo, good projects are enjoying a rent premium. Hong Kong is another example, where rents have started to edge up in Central after languishing for an extended period of time, driven by demand from Chinese mainland brokerages who are backfilling spaces that are being vacated by firms relocating to lower cost submarkets.
“We have had a good start to the year and we are maintaining a positive outlook for the region,” Zialcita said. “We expect macroeconomic conditions to be generally supportive of the occupier and investment markets.”
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