Asia Pacific office investment demand expected to strengthen, says Colliers

KUALA LUMPUR: Demand for office investment in the Asia Pacific region is expected to strengthen further, underpinned by low interest rates, faster rental growth and institutional investors making a comeback, said international real estate consultancy Colliers International.

While growth in office markets across the region during the second quarter (2Q) was centered around areas with a high financial services component, Colliers expects the non-finance sector to “take the leasing market in the region to the next stage of rental increase", although individual centres in the middle of their supply cycle could see rental growth losing momentum, said Asia Pacific managing director of corporate services Mark Lampard.

He expected office demand fundamentals in the region to be solid over the next 12 months, amid a low-interest rate environment, accelerating rental growth and the return of institutional investors.

In its Asia Pacific Office Market Overview, Colliers found that office markets across the Asia Pacific region registered more signs of growth in the second quarter of this year (2Q) amid stronger business confidence among office occupants, in line with continued economic recovery in the region, better-than-expected recovery of intra-regional trade and resilient private consumption expenditure.

“Led by occupiers engaged in the financial services sector, the office leasing demand in 2Q2010 was particularly strong in certain centres with a high financial services component, such as Hong Kong and Singapore,” said Lampard.

“A number of companies took advantage of competitive rental offers in the markets by committing to additional space for headcount expansions in the future,” he added.

He noted that in Singapore, Barclays Capital took up an extra 100,000 sq ft in Marina Bay Financial Centre Tower 2 after it had earlier pre-committed to leasing 250,000 sq ft in the same building, while in Hong Kong, AXA leased 180,000 sq ft in Landmark East after committing to around 30,000 sq ft in Exchange Tower, which in the same sub-market in March.

“With sustained absorption, average office rentals in the region picked up additional growth momentum, edging up 1.4% quarter-on-quarter in 2Q2010.” said Mark.

Overall buying interest was also strong in the previous quarter, with high-net worth private investors active in the market.

“Thanks to the continued growth in occupational demand and concrete signs of rental increases over the past few quarters, there were signs that institutional investors started returning to the market in 2Q,” he said.