Asia-Pacific Office Rents Increase Across Region

Prime office markets in the Asia-Pacific region held strong in the first quarter despite an uneasy geopolitical landscape.

Of 24 tracked cities across Asia-Pacific, 18 registered stable or increasing office rents in Q1, up from 17 in the fourth quarter of last year, Real Estate Asia reported, citing Knight Frank’s latest office highlights report.

India and Australia led the way in terms of office rent growth in the broader Asia-Pacific market. Bengaluru topped the list with a 14 percent year-over-year increase in rent. That growth was largely supported by strong demand from global capability centers, which accounted for 41 percent of leasing activity in the Indian city. Mumbai saw a quarterly leasing record of nearly 5.6 million square feet.

Down under, prime net effective rents in Australia rose 8.4 percent year-over-year, an increase from 5.9 percent in the quarter prior. Sydney and Brisbane saw the largest gains in office rental growth with 8.6 percent and 8.2 percent, respectively, reflecting a dearth of new supply in the continent’s major cities, according to Real Estate Asia.

Tokyo, meanwhile, was one of the tightest office markets worldwide. Vacancy in the Japanese capital dropped to a record low of 1.1 percent, while rents inched up 8.9 percent year-over-year. The uptick came amid high construction costs and labor shortages keeping new supply from being delivered.

India notched major leasing transactions in the first quarter with tenants including J.P. Morgan, Smartworks and SBI. Deloitte committed to offices in Beijing, DJI leased space in Shenzhen and La Trobe Financial doubled down on Melbourne.

Across the region, vacancy tightened for a second consecutive quarter to 14.1 percent. That number could increase to between 16 percent and 18 percent as roughly 107.6 million square feet of new office space comes online in the near future, per Knight Frank.

Office user confidence in the broader Asia-Pacific market has held stable despite uncertainty stemming from rising tensions in the Middle East. Some companies might put off leasing decisions in the short term, though because development is not meeting demand, it might be hard for occupiers to hold out for a long period of time, according to Knight Frank.

— Chris Malone Méndez