Office rents in Asia Pacific rise as vacancy rates edge down.
Office rents in Asia Pacific climbed in the first half with vacancy taking a dive by 121 basis points (bps), according to the Colliers International Global Office Highlights 1H 2011 released recently.
Covering 173 office markets in the world, the report finds Grade A office rents in Hong Kong to be the most expensive worldwide, followed by London – West End. Paris replaced Tokyo as the third most expensive Class A office rent in the globe, while London – City remained in the 5th spot.
The Asia Pacific office vacancy rate tumbled 121 basis points (bps) to 11.42%, while the regional office rent edged up 2.9% in the first half of 2011. Hong Kong’s Class A office rent at US$213.70 per sq ft per year was the highest in the region as well as the world, while Tokyo (US$104.91 per sq ft per year) and Singapore (US$87.00 per sq ft per year) ranked the second and third most expensive, respectively, in Asia Pacific.
“Although Asia registered rising rent and lowering vacancy in 3Q 2011, demand for office spaces in the region showed signs of weakness amidst increasing concerns of the European sovereign debt crisis and uncertain growth prospect in the United States,” said Simon Lo, Executive Director of Research and Advisory, Asia at Colliers International. “Individual multi-national corporations are expected to give a pause of their expansion plan, or even consolidate, while some local enterprises in the region still have solid occupational demand.”
The region remains characterised by high levels of office construction. Construction in 10 cities, including Bangalore, Beijing, Chengdu, Chennai, Delhi, Guangzhou, Ho Chi Minh City, Mumbai, Shanghai and Tokyo, totaled 138 million sq ft at midyear. Guangzhou recorded the most office space under construction worldwide with 31.3 million sq ft office being built.
Europe, Middle East, Africa (EMEA)
In EMEA, seeing more mixed economic conditions, the average office vacancy rate was relatively higher at 12% at mid-year. However, office rents in the region largely held steady. The Class A rent in London West End remained the highest in the region, or the second most expensive worldwide, at mid-year. Meanwhile, office space under construction in the region was down modestly from 163 million sq ft at the end of 2010 to 159 million sq ft in mid-2011.
The United States office market has yet to see recovery with many markets still recording little or no growth. Office rents continued to languish with those in downtown and suburban markets registering small decreases in the first half of 2011. Given the sudden stall in job creation and continued high energy costs, full recovery of the United States office market is expected to surface in mid-2012 at the earliest. By comparison, Canadian markets enjoyed a relatively good half year supported by a robust first quarter and a modest job gains in the first half of 2011.
In terms of Class A gross rent, Midtown Manhattan in New York (US$64.40 per sq ft per year) was the most expensive in the region as of June 2011.
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