Bloomberg News

Asia-Pacific Office Rents Increase at Double the Global Pace

November 08, 2011

Nov. 8 (Bloomberg) -- Office rents in the Asia-Pacific region increased at about double the global pace in the third quarter as China’s economic expansion fueled demand for commercial real estate, Jones Lang LaSalle Inc. said.

Rents for the highest-quality office space in the region increased 10.5 percent from a year earlier, the Chicago-based broker said yesterday in a report. That compared with a global growth rate of 5.5 percent.

Cities in Asia, including China’s financial hub Shanghai, Perth in Australia’s mining heartland and the technology center of Bangalore in India, had some of the highest levels of annual rental growth, Jones Lang said, as economic expansion in the region outpaces the U.S. and Europe. The Americas had a 2.6 percent advance, while rents in Europe rose 4.4 percent.

“Most major markets are in better shape than they have been since 2008, but investors and corporations are unsettled by current economic uncertainties,” Arthur de Haast, head of Jones Lang’s international capital group, said in the report. “Appetite for risk has diminished,” he said, prompting investors to focus on buildings that already have tenants.

Beijing rents soared 50.6 percent year on year, the most in the Asia-Pacific region, followed by Jakarta with 48 percent and Perth with 26.9 percent because of demand from China for Australia’s commodities. Beijing, Jakarta and Perth also had the largest quarter-on-quarter increases, according to the report.

Seventh Straight Gain

Prime office rents in the 81 markets researched by Jones Lang rose by 1.1 percent during the quarter from the previous three months. Overall rents increased for the seventh consecutive quarter and they are up 8.2 percent since the bottom of the market in the fourth quarter of 2009, Jones Lang said.

The average global office vacancy rate is 13.8 percent, the lowest in two years, according to the broker.

Grade A office rents in Hong Kong climbed 20.6 percent in the third quarter from a year earlier, though they declined 0.9 percent from the second quarter, according to Jones Lang. It was the first quarter-on-quarter decline in Hong Kong since the global financial crisis, the report said.

“We expect rents to increase in most markets over the short term, although Hong Kong and Singapore may witness some softening, given their greater exposure to global economic conditions,” the report said.

Prime office rents in Singapore rose 19.7 percent year on year and 0.6 percent from the second quarter, according to Jones Lang.

Hard Landing?

Office rents in Hong Kong may fall as much as 40 percent over the next two years if China goes through an economic “hard landing,” Barclays Capital Research analysts Andrew Lawrence and Vivien Chan said in a report last month.

The biggest increase among the 81 markets in Jones Lang’s index was in the Silicon Valley region of northern California, where office rents jumped 59.9 percent from a year earlier. Moscow rents rose 41.2 percent.

Prime office rents in the Asia-Pacific region climbed 2.5 percent in the third quarter from the second, while the Americas had a 1.1 percent increase, Jones Lang estimates. There was no change in Europe.

--With assistance from Kelvin Wong in Hong Kong. Editors: Andreea Papuc, Andrew Blackman, Jeff St.Onge.

To contact the reporter on this story: Neil Callanan in London at ncallanan@bloomberg.net.

To contact the editors responsible for this story: Andrew Blackman at ablackman@bloomberg.net; Andreea Papuc at apapuc1@bloomberg.net.


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