Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on September 13, 2017

PETALING JAYA: Out of the 20 markets tracked by global property consultancy Knight Frank, Kuala Lumpur and Bangkok have experienced rental decline in the prime office market in the second quarter of 2017 (2Q17), according to Knight Frank’s “Asia-Pacific Prime Office Rental Index” report.

“Kuala Lumpur has been experiencing rental decline for a year, coupled with creeping overall vacancy rates.

“However, we expect to see sustained demand in selected established and upcoming decentralised office locations served by the LRT (light rail transit) and new MRT (mass rail transit) lines,” said Knight Frank Malaysia executive director of corporate services Teh Young Khean.

Bangkok, which topped the chart last quarter, has experienced its first rental decline in almost three years, having slid marginally by 0.2% in the quarter.

“Given a limited supply, however, a rising trend may resume for the remainder of 2017,” said Knight Frank.

Knight Frank’s Asia-Pacific Prime Office Rental Index has increased 1.2% quarter-on-quarter  (q-o-q) and 0.6% year-on-year as at end-2Q17, a result of rising rentals in 15 of the markets over the quarter.

“The pickup in global trade and domestic demand has negated geopolitical risks to a certain extent, thereby providing a strong foundation for the Asia-Pacific prime office markets,” commented Knight Frank Asia-Pacific head of research Nicholas Holt.

Phnom Penh tops the chart for 2Q17 with a 4.2% q-o-q increase, compared with a flat performance last quarter.

“The completion of Exchange Square not only set a new benchmark standard for Grade-A offices, but its strong pre-commitment level also boosted prime rental levels in the Cambodian capital,” said the report.

In Hong Kong, as prime rentals continue  to edge higher, cost-conscious tenants are expected to continue relocating to other areas such as Wong Chuk Hang.

While positive economic growth bodes well for the Tokyo office market, the looming supply influx for the next few years is set to turn the market in favour of tenants.

“Despite delivering around 92,000 sq m of new prime supply, Singapore’s prime rentals held steady in 2Q17 after a two-year decline, owing to continued demand from sectors such as technology, co-working and professional services.

“In Jakarta, rentals remained unchanged but a downward trend is expected for 12 months due to a huge incoming supply,” said Knight Frank.

All four cities Down Under have performed strongly with rising rentals and dropping vacancy rates for 2Q17.

“Perth continued its rental recovery track, aided by minimal new stock while Sydney prolonged its rental growth for 18 consecutive months, albeit slowing to 1% compared with 1.4% in 1Q17.

“In Melbourne’s central business district, a landlord-favourable market condition has led to a gradual drop in incentives over the past few quarters. With improving market sentiment and a tight supply, the Brisbane office market is set to extend its acceleration for 12 months,” said the report. — EdgeProp.my
 

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