THE Asia Pacific property sector continues to improve its performance as market activity surged in the second quarter of the year, mainly driven by the sharp growth in office leasing, according to a report published by a global research consultancy firm.
Research consultancy Jones Lang Lasalle (JLL) said in a report that leasing volumes for the second quarter of the year were 40 percent higher than in the same period last year.
“The strong pick-up has been seen across a widening range of occupier types. Technology continues to be very active, with IT outsourcing and e-commerce driving take-up of space in many markets,” JLL said.
India and Greater China accounted for 60 percent of the total volumes with Delhi and Bangalore in India achieving close to 600,000 square meters of new leasing deals while Shanghai in China is on track for its strongest year of take-up on record.
Tokyo also recorded decent volumes, mainly caused by the IT take-up and ongoing consolidation to newer quality buildings, the report said.
However, the report noted that Southeast Asia was generally lackluster during the quarter with the exception of Manila, where a high demand for offshoring and outsourcing exists.
The report also noted that Grade A office completions in Asia Pacific strongly grew by 120 percent year-on-year to1.6 million square meters in Q2 2015, with China and India accounting for almost 80 percent of the total.
Meanwhile, vacancies rose in cities such as Beijing, Tokyo, Manila, Jakarta and Kuala Lumpur on the back of new office building completions.
“Markets with double-digit vacancy include the Shanghai decentralized market, Jakarta, Kuala Lumpur and most Australian and Indian cities, where vacancy levels are generally between 10 percent and 20 percent,” JLL noted.
Office rental growth in the Asia Pacific region accelerated in the second quarter of the year with net effective rents increasing by 0.9 percent, higher than the 0.5 percent recorded last quarter.
Hong Kong achieved the strongest quarter-on-quarter growth at 5.6 percent followed by Shanghai at 3.0 percent and the central business district of Tokyo with 2.4 percent.
Rental growth in Singapore, on the other hand, declined by 5.2 percent quarter-on-quarter as landlords started lowering rents in view of the large impending supply. Australia also followed a downward movement as rents fell by 5 to 6 percent in cities such as Perth and Adelaide, where vacancy remains at double-digit levels.
JLL forecasts growth in the office leasing sector will continue in the second half of the year.
“We are optimistic that office leasing volumes will continue to improve during 2015 and have upgraded our annual forecast to 15-20 percent growth. It should be another year for investment activity with second half volumes expected to be higher than the first six months,” the property consultancy firm said.
It added: “We are forecasting moderate rental and capital value increases of less than 10 percent for most sectors and markets in 2015, with further yield compression as capital values continue to outspace rents in most cases.”