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Asia Pacific Remains Well Placed to Weather Short-term Volatility

By on Nov 08, 2011 in Property News

Expansionary demand for prime office space remained firm in Greater China in the third quarter but other key markets saw corporate activity decline amid the uncertain global economic outlook. The CBRE Asia Pacific Office Rent Index mildly increased by 2.2% q-o-q in the third quarter, the lowest rate of growth recorded since the third quarter 2010 as corporate turned more cautious. Cost reduction continued to drive demand for office space in Hong Kong and in Tokyo, whilst in Singapore the flow of leasing deals also began to ease.

Greater China remained the key driver to fuel regional rental growth as domestic firms and multinationals across all sectors retained strong expansionary demand with Beijing and Guangzhou enjoying brisk growth of 8.8% q-o-q and 7.8% q-o-q respectively. Markets in China saw vacancy fall to the lowest level since mid-2008 and led the regional decline in vacancy. Overall vacancy rate in 16 Asian markets declined to 9.3% q-o-q during the period.
Hong Kong saw rental growth slow to 1.3% q-o-q in the quarter amid reduced take-up by companies in the financial sector. Elsewhere, the volatile global economy coupled with rising secondary stock also caused occupiers in Singapore to turn more cautious towards expansion. Large pockets of space were starting to become available in both markets.

Rent in Delhi NCR and most Southeast Asian markets continued to pick up but new supply may limit growth in the future quarters. Elsewhere, the new supply pipeline in Tokyo, Hanoi and Seoul, where markets currently enjoyed relatively low vacancy levels, will also put substantial pressure on vacancy and rent going forwards.

Overall rental growth in the Pacific also began to ease in the face of falling occupier confidence. However, vacancy in prime office buildings in Pacific was exceptional low across all markets and the trend is likely to persist over the reminder of 2011 due to very limited new supply. 

Asia’s substantial development pipeline continues to contrast with the lean supply outlook in the Pacific although falling demand and supply pressures in Asia means developers may opt to delay some of these completions until 2012. Developers in selected markets have also turned more cautious towards new projects as the weak global economy weighs more heavily on business sentiment.

Despite the instability in regional stock markets and the worsening economic situation in the United States and Eurozone, the region remains well placed to weather the current short-term volatility. Mr. Nick Axford, Executive Director and Head of CBRE Research, Asia Pacific said, “Rental growth, however, is likely to continue to moderate slightly in the months ahead as the external economic volatility will continue to weigh on business sentiment in the region going forward. Occupier demand should remain firm in Greater China markets on the back of robust demand particularly from domestic companies. Externally-oriented markets such as Hong Kong and Singapore will be particularly vulnerable to further disorder in the global economy.” He continued, “Decreased occupier activity in Tokyo and India, coupled with a large quantum of new supply in the pipeline means rent would come under downward pressure. In contrast, the Perth and Brisbane office markets in the Pacific will continue to benefit from the commodities and demand for office space should remain positive.”

To read or download a full report of CBRE’s Q3 2011 Asia Pacific Office MarketView, please click here.

For more information about Bangkok office leasing, please contact CBRE’s Office Services team on +66 2 654 1111 or


Chris Hardy has extensive research experience. Chris specializes in property research internationally writing for CBRE specifically about global issues and trends.

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