The rise of technology firms was the headline story in Knight Frank Asia-Pacific’s latest Prime Office Rental Index report, but for Bangkok the fact that the city is currently seeing its lowest vacancy rates for almost 10-years on the back of what the real estate firm says was significant net absorption of office space during the second quarter of this year, is the standout story for Thailand.
Office rental rates in Bangkok rose 8.8 percent year-on-year, and by 1.1 percent between the first and second quarters of this year. The city still ranks as one of the cheapest office locations in Asia-Pacific.
While a number of markets in the Asia-Pacific region are plagued by excess supply, sectors empowered by technology, such as online peer-to-peer financial services in Shanghai and e-commerce in India, are driving leasing demand, the real estate firm reported.
Sustained strong supply lifted the vacancy rate and lowered rents in Beijing further. Moving forward, a dearth of new completion in the second half of the year will give landlords there a break. The situation in Shanghai is just the opposite. No office space was added in the quarter, boosting the occupancy rate and rents. However, the market will be barraged by over one million sqm of planned new supply in H2 2015. Rents in Guangzhou will also experience downward pressure due to increased supply later this year.
Hong Kong and Taipei continued to enjoy moderate rental growth. Leasing demand in the former was generated by Mainland financial institutions, especially fund houses, taking advantage of the Mutual Fund Recognition Scheme implemented in May, while that in the latter was supported by foreign banks and high-technology firms.
In Southeast Asia, increasing competition from Grade ‘B’ office buildings led prime rents in Phnom Penh to stay flat. Similarly, a strong supply pipeline is capping rental growth in Kuala Lumpur.
However, limited good-grade dual-compliant (MSC and Green) buildings will afford these landlords higher bargaining power.
Between mid-2011 and the end of last year, prime rents in Jakarta surged by a phenomenal 2.7 times. The resultant construction boom is finally reversing the very rental growth that inspired it. In Q2 2015, a huge increase in supply caused prime rents to slide by 5.3% as the vacancy rate soared.
Meanwhile, Singapore faces a double whammy of strong future supply and lower take-up on the back of a slowing economy.
To read Knight Frank’s Asia-Pacific Prime Rentals Index research report click here.
