Tokyo Sees Robust Rental Growth In Knight Frank Asia Pacific Prime Office Rental Index

Global real estate consultancy Knight Frank has released the Asia Pacific Prime Office Rental Index for Q2 2015. While a number of markets in the region are plagued by excess supply, sectors empowered by technology, such as online peer-to-peer financial services in Shanghai and e-commerce in India, are driving leasing demand.

Knight Frank’s Asia Pacific Prime Office Rental Index increased 1.2% in Q2 2015, as the average vacancy rate dropped by 0.1 percentage point. 11 out of the 19 markets tracked experienced rental growth, while 3 registered no movement. Tokyo saw the highest rental growth in the region.

Going forward Knight Frank said they expect rents in 12 markets to either increase or remain steady over the next 12 months.

While a number of markets in the region are plagued by excess supply, sectors empowered by technology, such as online peer-to-peer financial services in Shanghai and e-commerce in India, are driving leasing demand.

Sustained strong supply lifted the vacancy rate and lowered rents in Beijing further. Moving forward, a dearth of new completion in the second half of the year will give landlords a break. The situation in Shanghai is just the opposite. No office space was added in the quarter, boosting the occupancy rate and rents. However, the market will be barraged by over one million sq m of planned new supply in H2 2015. Rents in Guangzhou will also experience downward pressure due to increased supply later this year.

Hong Kong and Taipei continued to enjoy moderate rental growth. Leasing demand in the former was generated by Mainland financial institutions, especially fund houses, taking advantage of the Mutual Fund Recognition Scheme implemented in May, while that in the latter was supported by foreign banks and high-technology firms.

Elsewhere in East Asia, Tokyo saw an acceleration in rental growth, on the back of an uptick in economic cyclical conditions. In Seoul, both demand for and supply of office space slowed down; prime rents edged up marginally.

In Southeast Asia, increasing competition from Grade-B office buildings led prime rents in Phnom Penh to stay flat. Similarly, a strong supply pipeline is capping rental growth in Kuala Lumpur.

However, limited good-grade dual compliant (MSC and Green) buildings will afford these landlords higher bargaining power. Between mid-2011 and the end of last year, prime rents in Jakarta surged by a phenomenal 2.7 times. The resultant construction boom is finally reversing the very rental growth that inspired it.

In Q2 2015, a huge increase in supply caused prime rents to slide by 5.3% as the vacancy rate soared. Meanwhile, Singapore faces a double whammy of strong future supply and lower take-up on the back of a slowing economy. Although Bangkok also saw a significant addition of office space, net absorption hit the highest level in almost six years, bringing vacancy down to the lowest rate since 2006.

In South Asia, e-commerce is emerging as a major demand driver in India, although the IT/IT-enabled service sector still accounted for half of the office take-up in Bengaluru and 30% in New Delhi. Notably, Amazon and Flipkart signed up almost 300,000 sq m of space in Bengaluru recently. In Mumbai, the banking, financial services and insurance (BFSI) sector still leads in terms of leasing demand.

In Australia, Sydney remained the bright spot. Following Twitter and Amazon’s recent expansion, continuing the trend of technology occupier demand growth, Google is also looking to finalise its decision. Net absorption in the first half of 2015 continued to be negative in Brisbane and Perth, and a strong future supply pipeline will add to their woes through 2016. Melbourne, on the other hand, saw demand double on a year on-year basis, as tenants continued to consolidate in the CBD.


Top stories from across the globe

  • The Future of Banking: Truth is Rarely Pure and Never Simple
  • Top Money Manager: «We Avoid Tesla Because of Elon Musk»
  • 1MDB and the Affected Banks: 100 Headlines
  • The Man Who Turned Down Marilyn Monroe
  • The Seven Conditions for Good Succession
  • The (Slow) Death of U.K. Investment Banks

PHOTO GALLERIES Networking Event Networking Event

Show pictures

stars China Symposium 2016

stars China Symposium 2016

Show pictures

Compare my salary

Compare my salary

Feeling Underpaid? Benchmark your salary by job title, company and location. Find out where you stand in minutes.

compare my salary


Newsletter-SymbolFree Subscription

Subscribe to our free newsletter and receive daily email alerts from the finews editorial team with a list of the top featured articles.

Share with us

Do you have any market intelligence to share with – email us on – All communication is completely confidential and strictly anonymous.