Bangkok remained the strongest performer among cities on the Knight Frank Asia-Pacific Prime Office Rental Index, recording the highest growth rates in the region both quarter-on-quarter (3.1 per cent) and year-on-year (9.6 per cent).
Rents have been on the rise for more than two years and are expected to continue rising due to strong demand amid tight supply, said executive director Marcus Burtenshaw.
“Despite a generally unremarkable macroeconomic climate, strong growth in Thailand’s service sector is leading to what seems like unceasing demand for office space, pushing rents ever higher,” he said in a press release.
“Faced with the reality of higher rents, tenants are increasingly demanding more from their buildings. The requirements are not limited to good access to mass transit, grand lobbies or high ceilings. Tenants want more natural light, improved security systems and quality food outlets that cater to the budgets of all of their employees.
“Looking ahead, supply-side lag and a growing service sector mean that this climate of rising rents is likely to continue for some time to come.”
Knight Frank, an independent global property consultancy, on Monday released its Prime Office Rental Index for the first quarter of 2017. It includes Manila for the first time, bringing the total number of markets tracked to 20.
The index in Q1 grew 1 per cent quarter-on-quarter due to rising rents in 10 of the markets, with rental declines experienced in five of the markets tracked.
Tokyo and Manila tied at the bottom of the index with a 1.1-per-cent decline quarter-on-quarter.
In Tokyo, vacancy rates for prime space have been increasing as the city’s office market comes off its peak.
Despite its decline this quarter, Manila’s office rental take-up has been robust against the backdrop of a strong economy. Rents were on a rising streak over the last 15 consecutive quarters until Q1.
Mainland Chinese companies remained the most important source of new take-up in Hong Kong’s Central district (2.5 per cent), as landlords stayed aggressive due to limited supply, thus further pushing rental levels upwards.
Over the next 12 months, Knight Frank expects rents in 15 of the 20 tracked cities to either remain steady or increase, up from 12 in the previous forecast.
Nicholas Holt, head of research, said United States political uncertainty, rising interest rates and Chinese capital controls all made waves during the first quarter. Amid these uncertainties, however, global economic activity continued to gain momentum.
With a moderate rise in commodity prices and improving market sentiment, these positive elements bode well for several Asia-Pacific prime office markets for the rest of the year.