Asia Pacific office leasing gains momentum with 18% net absorption growth in 2Q14

Tokyo leads the charge.

Office leasing continues to gather momentum, with net absorption growing by approximately 18% quarter-on-quarter to 10 million sq. ft., led by Tokyo.

According to a release from CBRE, its CBRE APAC Office Rental Index also grew steadily at 0.8% quarter-on-quarter in Q2 2014.

However, the large volume of new supply scheduled to be completed in H2 2014 in emerging markets may slow rental growth in those markets.

Director of CBRE Research, Jonathan Hsu commented: “The second quarter of 2014 has been marked by rapid increases in office rents in Singapore and Japan.

Singapore’s increase is driven by the growing importance of Singapore as gateway to SE Asia, alongside expansion by TMT-sector firms and domestic financial institutions.

Here’s more from CBRE:

Meanwhile in Japan, optimism for the continued revival of the economy is having a significant and positive effect on office demand.

Looking forward we expect that the large volume of new supply scheduled to be completed in H2 2014 in emerging markets such as China, India and Indonesia to slow rental growth in those markets.

However, we expect Singapore and Japan to continue their strong growth, which will help drive even stronger APAC rental growth as a whole.”

APAC Office Rental Index growth held firm at 0.8% quarter-on-quarter in Q1 2014, against 1.0% in Q1 2014. Tokyo led the APAC region, recording its strongest rental growth in seven years, reaching 2.8% quarter-on-quarter.

Manila (up 2.2% quarter-on-quarter) and Singapore (up 3.4% quarter-on-quarter) also outperformed in the region.

Domestic financial institutions and the Technology, Media, and Telecoms (TMT) sector remain the key drivers of office demand.

In tight markets such as Singapore and Japan, the shortage of prime office space in core locations is prompting occupiers to pre-commit to upcoming new supply.

The CBRE APAC Retail Rental Index grew by 1.8% quarter-on-quarter in Q2, from 1.5% in Q1 2014, mainly driven by rapid rental growth in Tokyo (which hit 9.1% quarter-on-quarter).

Given the observed slowing in consumer spending and high occupancy costs for the region as a whole, cautious retailers are taking longer over lease negotiations.

Australia, traditionally led by domestics retailers, continued to attract expansionary interest from international retailers in both fast fashion and luxury.

Meanwhile, the APAC Logistics Rental Index grew at a slower pace of 0.5% quarter-on-quarter in Q2, against 0.6% in Q1 2014.

Retailer caution and increased supply in the logistics market will dampen expectations for rental growth in logistics.

Guangzhou and Hong Kong continued to lead growth due to strong demand for space, low vacancy and tight development pipelines in the two cities.