Growth seen in Asia Pacific office market

Overall outlook on the Asia Pacific office market remains bullish in the second half of 2015, according to a recent study by global property consultancy CBRE.

Rents increased by 0.7% quarter-onquarter, but a corresponding increase in vacancy to 9.1% is expected to slow down any further hikes in rental rate.

Demand has been driven by expansionary and relocation activity in cities such as Tokyo, Shanghai, Hong Kong and Bangalore. However, at a regional level, new office supply outstripped demand for the second consecutive quarter, pointing towards what CBRE predicts will be ongoing downward pressure on rental growth in the region over the remainder of the year.

“This quarter we saw steady rental growth in the region, led particularly by strong performances in key cities. However, we also saw an increase in vacancy in markets such as Taipei, Bangkok, Ho Chi Minh, Perth and Brisbane,” explained Dr. Henry Chin, head of research at CBRE Asia Pacific.

Chin illustrates the interesting dynamic and diverging situation in the outlook for the region with its two major financial centers—Hong Kong and Singapore. “Hong Kong will remain a regional driver of rental growth—with tight space availability at 3.5%—while in Singapore, we see softening in demand, rise in secondary space, and pending new supply in 2016 which are likely to put downward pressure in rents,” he adds.

In terms of industry demand, Chin noted that tech firms have pushed forward this year in helping drive take-up of office space, particularly premium ones in central business districts (CBDs). “Although, this tends to be temporary, and as startups grow larger they tend to later move to decentralized areas,” he said.

The take-up of space by tech firms is also spread across the region, rather than centralized in a few specific locations. Chin is uncertain whether the growth in the tech sector will be enough to offset any ongoing decline in space take-up from global financial servicesrelated firms. “However, we have seen some positive signs in Hong Kong, where—in addition to demand from local and PRC financial firms—selected Western finance and finance-related sector tenants have started expanding again, albeit cautiously,” he added.

In Manila, the office market is experiencing the same rental increase in prime and grade A offices, registering 8.8% growth year-on-year due to healthy occupier demand, according to Rick Santos, chairman, founder and chief executive of CBRE Philippines. “BPO and outsourcing operations still fuel the demand for office space,” he said.