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Bangkok office rents rise 1.3 per cent in first quarter amid gradual increases across region

OFFICE RENTAL rates in Bangkok's main business districts last quarter still increased by 1.3 per cent over the fourth quarter of 2013 and by 8.5 per cent year on year, despite the political turmoil, according to Jones Lang LaSalle.

In the Asia-Pacific region, demand for Grade A office space is beginning to revive. As corporations became more bullish, leasing activity picked up in some markets across the region in the first three months of the year with average growth of 0.8 per cent quarter on quarter, compared with 0.2 per cent in the fourth quarter of 2013.

While expansion demand in the region remained subdued, net effective rents grew in more than half of all Tier 1 markets. Leading the region, Singapore saw quarterly rental growth of 4.5 per cent on the back of low and falling vacancy, while Japan also saw the market strengthen with a quarterly increase of 2.0 per cent in Tokyo.

Chris Archibold, head of markets at JLL's Singapore branch, said yesterday that office vacancy was relatively low across the city-state and many of the major developers and investors had portfolios with occupancy rates in excess of 95 per cent.

Three office buildings are coming to the Singapore market at the end of this year - two in the central business district, namely South Beach Tower and CapitaGreen, and one decentralised project called Westgate Tower. These projects are seeing a strong level of interest from major multinationals.

The next wave of supply does not come online until the end of 2016, in effect a two-year gap. As a result of this combination of factors, the Singapore office market is expected to see rents go up over the coming 12 months.

On the back of this improved occupier sentiment, rents also edged up in Beijing by 0.2 per cent quarter on quarter for the first time since the third quarter of 2012 and started to stabilise in Hong Kong Central, rising by 0.6 per cent, and in Seoul, going up by 2.1 per cent.

Minor changes

Rents remained flat or recorded small increases in Shanghai, India and emerging Southeast Asia, where Jakarta's growth moderated to 1.0 per cent quarter on quarter despite outperforming the region on an annualised basis, up 18.4 per cent.

Sydney and Melbourne saw effective rental increases of 1-3 per cent over the quarter but declines were noted in most other Australian cities, with the biggest quarterly fall of 12 per cent in the resources city of Perth.

Jane Murray, head of Asia-Pacific research, said that given the improvements in the region's overall leasing activity over the first quarter, leasing volumes would likely continue to grow at 10-15 per cent for the full year. There are some downside risks to this forecast including the unrest in Ukraine and possible impacts relating to the military coup in Thailand and elections in Indonesia.

"While rental growth is likely to be limited in most markets in the short term, we expect single-digit growth for the full calendar year, with Singapore and Tokyo likely to see the biggest increases as vacancy remains low," she said.

"Markets in Hong Kong and Beijing should continue in their recovery but we predict that Jakarta rental growth will be sharply lower than last year as corporations remain cautious."

Throughout the quarter, capital values remained resilient, increasing moderately in most markets across the region with aggregate growth of 1.6 per cent quarter on quarter and 5.6 per cent year on year.

On an annualised basis, Jakarta is, again, the regional leader with growth of 15.5 per cent, followed by Bangkok at 11.5 per cent and Taipei at 11.1 per cent. On a quarterly basis, Taipei, Sydney and Tokyo saw the biggest increases of 5.5, 5.1 and 4.8 per cent on the back of rising rents and strong investor sentiment.


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