The office market in Asia-Pacific is showing signs of improvement this year, in line with stronger regional and global economic growth, according to research by CB Richard Ellis's (CBRE) Asia-Pacific office.
Meanwhile, the political unrest in Bangkok has not had an effect on the capital’s office market to date, the company said.
Despite the signs of improvement, overall Asia-Pacific rents are expected to continue to display little movement either this quarter or next.
Rental growth in the likes of Tokyo, Singapore, Auckland and some Southeast Asian markets will be offset by declines elsewhere, particularly in Shanghai, most Australian markets and some sub-markets in India.
Overall vacancy may increase this year, said CBRE, with 8.03 million square metres of net floor area of new supply scheduled to be completed.
Oversupply pressure in certain markets will also be high. Much of the new supply will be in non-core areas, tightening the availability of prime space.
The company expects competition for prime space to intensify, particularly in Hong Kong, Singapore, Beijing and Bangkok, where vacancy is at or close to historical lows.
In Bangkok, the annual growth in the amount of occupied space in 2013 was more than 200,000 square metres, the best performance since 2006. The level of demand combined with the limited amount of future supply meant that rents continued to rise.
The shortage of options meant that tenants continued to commit to new buildings before completion.
To date, the ongoing political unrest has not had an impact on the Bangkok office market, said Nithipat Tongpun, head of office services at CBRE Thailand.
The research shows that demand for office space in Asia-Pacific strengthened in the fourth quarter of last year, and in the second half overall, particularly in the media, technology and pharmaceuticals sectors.
However, prospects for a significant upturn in demand largely rest on the health of the financial sector, which remains subdued as a result of new regulations and cost-cutting continuing to inhibit expansion of international banks. Domestic financial institutions are still more upbeat than their multinational counterparts.
Net absorption for the second half of last year in Asia-Pacific totalled 1.41 million square metres, an improvement on 1.31 million square metres recorded for the first half. Most markets saw an uptick in demand, with more leasing enquiries and transactions recorded in China, Japan and Singapore, in particular.
Meanwhile, the “CBRE Asia Pacific Office Rental Index” recorded a slight increase of 0.24 per cent quarter on quarter in the final three months of last year, as demand improved in a number of key markets.
Grade-A rental growth during the quarter was driven by the strong performance by several Southeast Asian markets, including Jakarta and Ho Chi Minh City.
Singapore also recorded its first rental increase – a jump of 2.1 per cent quarter on quarter – since the first quarter 2012 as many tenants went into expansion mode.
Overall vacancy in Asia-Pacific declined from 10 per cent in first half of last year to 9.3 per cent in the second half. Vacancy was down in 15 markets, up in nine and stable in one.
New Asia-Pacific supply for the year totalled 3.06 million square metres of net floor area. The figure was below the five-year average and the lowest annual volume of new stock completed since 2006, said CBRE.