Asia's office rents rise 2.1% in second quarter

HONG KONG: Office rents in Asia rose 2.1%, ending seven consecutive quarters of decline, according to international property consultant CB Richard Ellis.

The growth was spurred by increased demand as the steady regional economic recovery encouraged some multinational companies to reactivate expansion plans.

Overall vacancies declined by 90 basis points quarter on quarter to 10.9%. The increased number of inquiries for office space during the second quarter did not immediately translate into leasing transactions. However, this suggests that the leasing market will remain active over the coming quarters, the property consultancy said in a report.

"Within the second quarter, Greater China witnessed the largest upsurge in leasing activity with both multinational and domestic corporations quite active in taking up space in major cities," said Andrew Ness, executive director of CBRE's Asia research division.

"The total net absorption of prime office space in Hong Kong and first-tier Chinese cities, namely Beijing, Shanghai and Guangzhou, collectively accounted for three-quarters of the regional aggregate in the second quarter," Ness said.

In Hong Kong, near full occupancy in premium Grade A buildings and the recovery in demand from investment banks drove central business district (CBD) rental growth of 8.4% quarter on quarter.

In Beijing, all the major office submarkets recorded growth in rentals with citywide prime office rents climbing 4.1% quarter on quarter, while improved business sentiment and new rounds of hiring also resulted in an active office leasing market in Shanghai.

Singapore was another standout performer, with Grade A rents returning to growth after six consecutive quarters of decline, Ness said.

Robust demand has yet to induce significant hardening in rentals as landlords compete to fill space amid relatively high availability and, in certain markets, a large quantum of future supply scheduled to come on stream in the short-to-medium term.

"The Asian office market is expected to remain relatively muted for the reminder of 2010. Companies continue to be confident about the regional economic outlook, but concerns over a slower global economic recovery following the outbreak of the euro zone debt crisis will probably curtail aggressive expansion by multinationals over the short term." — South China Morning Post
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