Asia-Pacific office market to remain steady amid uncertainty

KUALA LUMPUR: Office space demand and occupancy in the Asia-Pacific are expected to remain intact in 2013 despite the current slowdown in the region amid uncertain global conditions.

According to the recent Cushman and Wakefield's Asia-Pacific 2013 office forecast research report, the regional economy is expected to support a still healthy demand for office space in most markets in the region.

Although growth has eased in the region's large economies, growth over the next decade will be mainly in Asia and foreign companies will benefit from strengthening ties with the region's main economic engines, according to the report.

Cushman & Wakefield Asia-Pacific managing director for research Sigrid Zialcita said the dearth of new office supply will sustain tight occupancies in Brisbane, Manila and Perth while the completion of several new projects in some cities in China and Australia will provide occupiers seeking top-tier space a chance to expand. Supply is building up in Kuala Lumpur, Guangzhou, Ahmedabad, Kolkata, Chengdu, Hanoi and Ho Chi Minh City, where vacancies are set to settle at 20% or higher through 2014.

"China and India continue to be hotbeds of construction, accounting for over 70% of the 144 million sq ft expected to be completed through 2014 in all 29 cities tracked," Zialcita said.

"Beyond 2013, the regional economy is expected to provide a solid backdrop through 2014 that will support a still healthy demand for office space and translate into high occupancies, rents and values which will bode well for most markets in the region," she added.

Richard Middleton, Cushman & Wakefield Asia-Pacific executive managing director for corporate investor and cccupier services, said globalisation will continue to shape demand drivers with the outsourcing industry offering an enormous upside in 2013 and beyond. This bodes well for India and the Philippines which are becoming increasingly popular locations for outsourcing business needs.

"The Philippines government has positioned itself as an attractive location for multinational corporations looking for lower-cost locations with a well-educated population who are fluent in English," he said. "It's for exactly this reason that we recently opened an office in Manila in order to service our clients on the ground."

Foreign investors and real estate investment trusts are expected to continue to flock to Asia's prime gateway markets. High occupancy rates and rentals continue to support the modest capital value in most markets.

John Stinson, Cushman & Wakefield Asia-Pacific executive managing director for capital markets, said the yield interest rate spread is at an all-time high in most gateway cities in the region such as Singapore, Beijing, Shanghai, Tokyo, Seoul, Hong Kong, Sydney and Melbourne.

"With current fundamentals pointing to a steady growth till 2014, we anticipate a strong investment activity in the first half of 2013 throughout the region's core markets," Stinson said.

"With increased investment activity, we anticipate that in 2013, cap spreads will peak particularly in the favoured markets of Tokyo, Seoul, Singapore and the east coast Australian cities. The fundamentals of growth markets for at least the next two years are compelling."

Founded in 1917, Cushman & Wakefield is the world's largest privately held commercial real estate services firm.

This story first appeared in The Edge Financial Daily edition of Dec 21, 2012.

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