Hong Kong office rent increases slowing

Professional real estate services firm Jones Lang LaSalle said rents in top tier markets aren’t increasing.

Its Q1 Asia Pacific Office Index Report in 27 key markets in Asia Pacific found that in Q1 2012 compared to Q4 2011, rents increased in 13 markets, were static in three markets and fell in 11 markets. The Index monitors grade A net effective rents.

On a year-on-year basis, Beijing and Jakarta saw the strongest rental growth across the region (around 50%).

“We continue to see a mixed picture across the office leasing markets in Asia Pacific,” said Jeremy Sheldon, head of Asia Pacific Markets at Jones Lang LaSalle.

“Whilst continued take-up from domestic companies is driving growth in markets such as Jakarta and across India, we have seen leasing demand slow elsewhere as a result of overall caution amongst corporates, the de-leveraging in the financial sector and slower supply additions in some markets.

“From an occupier perspective, maximising the productivity of their occupied real estate is the focus and if we see further declining rents in the more financially orientated markets, the opportunities to achieve this goal could be greater.”

Net effective rents corrected by 5% to 6% in Hong Kong and Singapore as some landlords lowered asking rents in view of ongoing contraction in the financial sector coupled with some tenants moving outside of the central business districts.

Some multinational corporations in China are withholding short-term expansion plans although take-up is being supported by demand from domestic firms and previously secured commitments in new completions.

Jones Lang LaSalle believes continuing global economic uncertainties, particularly in the Eurozone, impacted corporate hiring and office leasing demand in Asia Pacific in the first few months of 2012.

It estimates the Asia Pacific economy should still grow significantly faster than the rest of the world this year, although most countries in the region are likely to see a moderate economic slowdown compared to last year. This should result in a similar slowdown in aggregate leasing volumes during 2012, following a record year for take-up of space across Asia Pacific in 2011.