Asia Pacific Q213 office market overview

Economic Overview

Various factors impacted the Asian economies during 2Q 2013, such as further confirmation of slower than expected growth in China and increasing worries on the next interest hike in Asia as the US Federal Reserve signaled they may start scaling back its quantitative easing policy later this year. Against a backdrop of weakening economic conditions across the region, individual Asian countries have seen a drop in inflation and are still subject to various challenges ahead such as the potential risk of liquidity outflow from Asia. With the economic performance yet to show any sign of acceleration, the region is entering an era of slower growth.


Leasing Market

Office rents in most key cities in Asia Pacific saw no significant growth in 2Q 2013. Although Jakarta and Manila continued to be the key performers, with strong rental growth in the order of 4-6% quarter-on-quarter (QoQ), there was a significant slowdown in terms of space absorption during 2Q 2013 despite low vacancy rates. Perth saw average rents decrease the most among cities in the region, in the order of 5% QoQ, as demand softened due to the adoption of more conservative business attitudes in the current global environment.


Sales Market

Due to various property curbs in the investment market, more investment capital originating from Hong Kong and Singapore turned to offshore markets such as China and especially Japan, where inbound purchases doubled in the past six months. In Beijing and Shanghai the en bloc sales market witnessed a rebound in transaction activity in 2Q 2013, demonstrated by a number of significant deals done by both domestic and foreign institutions. However, in Hong Kong investment demand was dampened by government cooling measures with speculators exiting the market. Meanwhile, in Australasia, investment demand from institutional buyers chasing scarce prime assets remained strong, resulting in a slight tightening of yields.


Market Outlook

The economic environment in Asia is expected to remain uncertain as the region continues to be reactive to the overall global economic conditions. Individual governments are expected to focus on economic issues and introduce additional stimulus measures to help their countries emerge from prolonged bouts of deflation. Nevertheless, based on the findings of Colliers Asia Office Leasing Survey for 2Q 2013, it is anticipated that rents will increase in the next 12 months but the pace of rental growth will taper off. Investment transaction volume is likely to consolidate further in the second half of 2013, as risk-averse investors continue to be cautious, due to concerns that rising interest rates will lead to higher property yields and reduced property values.



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