"Regional office markets have shown resilience during a time of volatility in the equity market," said Jane Murray, head of research, Asia Pacific.

She said the financial centres of Hong Kong, Singapore, Shanghai, Sydney and Tokyo had all registered gains, while the developing markets of Bangkok, Kuala Lumpur, Manila and Jakarta are now trading a shade off their previous peaks in 1997.

Demand is broad-based with the banking and finance sectors leading occupier enquiries, followed by professional services such as accounting and law firms. Consumer business and IT companies are equally keen to expand, and though their requirements are not necessarily for Grade-A properties, some are willing to pay the premium to stay in core locations.

Second-quarter rents in Bangkok's central business district rose by 2.9 per cent over the previous quarter, or 12.2 per cent from last year. In Hong Kong (Central), rents jumped 8.9 per cent quarter on quarter, or 39.8 per cent compared to the same period last year. This is the 11th consecutive quarter of growth and the longest streak in 20 years.

Rents in Sydney registered an increase of 10.2 per cent compared to a year ago while in Singapore they grew by 13.5 per cent from the previous three months or 44.4 per cent year on year.

Leasing activity in most cities was hampered by the lack of supply rather than a lack of demand. This was particularly the case in Singapore, Tokyo and to a lesser extent Shanghai, where the majority of newly completed projects were precommitted.

Murray said some occupiers were willing to seek alternative accommodation outside the core districts given the surge in rents.

The Chinese cities of Beijing and Shanghai saw increasingly active leasing markets as further deregulation of China's money markets and business services sector is driving greater demand for office space.

Similarly, in India, the core markets of Delhi, Bombay, Bangalore and Madras witnessed a surge in enquiries with rents in some of these cities reaching the levels of Singapore despite the lack of professional property management on the premises.

Investor interest remained centred

on Japan, China, South Korea and Singapore.

"With rental growth still strong and the anticipated conclusion of the Federal Reserve's tightening policy, we expect more investment activity in the months ahead", Murray said.

With the market signed, she said the company suggested that short- to medium-term the real-estate market would stay robust.

This is supported by buoyant business sentiment and expansion. Investment activity remains solid with significant flow of funds from the United States, Europe and the Middle East. The expanding Asian economies will also underpin demand for prime office space in the second half of 2006 and increasingly into 2007.

With new quality supplies remaining tight and demand strengthening, rents should increase further. However, businesses are feeling the pinch of rising occupancy costs, which are expected to drive the trend for companies to decentralise their operations.

The strong performance in the office market is also being seen in the industrial, retail and residential sectors. Improving employment prospects bode well for the retail and residential sectors despite higher interest rates.

The retail sector in particular has been benefiting from growing consumer confidence and the surge in tourist arrivals in the region.