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Jones Lang LaSalle releases Q2 2013 Asia Pacific Office Index
SINGAPORE, 26 August 2013 – Asia Pacific’s tier one office markets have continued to experience subdued leasing activity in Q2 2013, according to the latest Jones Lang LaSalle Asia Pacific Office Index, as corporates remain cautious in their occupancy strategies.
Take-up of grade A office space was slow across most markets in the region, particularly in the financial centres of Hong Kong, Singapore, Tokyo and Sydney. However, the report shows steady take-up in the emerging markets of Southeast Asia, notably Manila, in the second quarter of the year. Mirroring the trend in the first quarter of the year, net effective rents in Q2 2013 were either flat or recorded only modest growth. Of the 27 markets monitored in the Jones Lang LaSalle Index, 14 saw a quarterly increase while the remainder either stabilised or declined. Aggregate rental growth across the region averaged 0.2 percent quarter on quarter, slowing further on the 0.4 percent growth of the previous quarter.
While Jakarta continued to lead the region with the largest quarterly (9.8 percent) and annual (37 percent) rental growth, Singapore (0.6 percent) and Hong Kong (1.5 percent) experienced quarterly rental increases for the first time since 2011. Rents, q-o-q, also increased slightly in Tokyo, Seoul, Shanghai, Manila and Bangkok, while leasing activity continued to slow in Beijing causing rents to decline by 1.6 percent q-o-q following a 3.7 percent fall in Q1. Effective rents also fell in most Australian cities, with Melbourne recording both the largest quarterly (-6.4 percent) and annual (-10.6 percent) decline, followed by Sydney, Brisbane and Perth.
Jeremy Sheldon, Managing Director, Markets, at Jones Lang LaSalle said: “The demand for office space has remained slow throughout the second quarter of this year and, while we have seen some renewed activity from local corporates and specific sectors such as pharmaceutical and technology, there is still an overriding emphasis on maintaining costs. That said, for many markets the supply side remains tight which has kept rents relatively flat. Even as some activity returns to the markets, driven by smaller occupiers, we remain cautious over any significant growth for the remainder of the year. ”
Throughout the quarter, capital values remained more resilient, increasing moderately in most markets across the region with aggregate growth of 1.7 percent q-o-q and 6.8 percent y-o-y. While Jakarta was, again, the regional leader with quarterly growth of 10.2 percent, Seoul and Singapore also recorded capital value increases during Q2 2013, up 5.8 percent and 1.9 percent respectively on the previous quarter.
Dr Jane Murray, Head of Asia Pacific Research, Jones Lang LaSalle commented: “As we saw in the first quarter of the year, landlords remain cautious on asking rents which reflects an on-going reluctance from corporate occupiers to pay higher rents. As such, we expect only single-digit rental growth during the remainder of the year with the biggest uplift likely to take place in Jakarta while some markets, such as Beijing, Sydney and Melbourne, may experience further slight declines. Similar to this quarter’s activity, continued interest from investors will drive capital values to increase faster than rents, resulting in yields holding firm or compressing further in most markets across the region.”
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