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Asia Pacific’s commercial real estate market is set to witness strong occupier demand, high transaction volumes and healthy investor flows in 2017, revealed a Cushman & Wakefield report.
This comes as the region is expected to maintain its modest growth pace into 2017, with gross domestic product (GDP) expanding by five to 5.2 percent in the year, said Sigrid Zialcita, Research managing director for Asia Pacific at Cushman & Wakefield.
Given the relatively healthy economic landscape across the region, job gains in office-using employment sectors are expected to drive new office space requirements to record highs within the region.
Top-performing markets continue to be those with broad-based growth across industries and sectors such as Beijing, Shanghai and Tokyo; as well as information technology/business process outsourcing (IT-BPO) hubs of Manila, Hyderabad and Bengaluru.
The demand strength will also be underpinned by positive developments in technology, media and telecommunications (TMT); the banking, financial services and insurance (BFSI); and other professional and business services sectors.
The report noted that the growing demand for office space has been fuelling a development boom, with office completions predicted to reach new highs through 2017.
New supply across core markets is expected to reach 50 million sq ft on average next year. Of these, about 70 to 80 percent will be contributed by Beijing and Shanghai. As such, vacancies in these two markets will likely increase by two to three percentage points.
In Singapore, the completion of several projects within the CBD, including the 1.9 million sq ft Marina One development, will see vacancies within the area climb to a seven-year high of about eight to nine percent. However, this will only be temporary as top-grade office space benefit from a flight-to-quality trend.
“Rising new supply will cause vacancies to edge up. However, rents will continue to hover at record highs in 15 markets, which could pose a strain for occupiers seeking to reduce costs in a slower growth and fast-changing environment. Nonetheless, occupiers will have increasing leverage as more than half of the markets will see vacancies rise to over 14 percent in 2017,” said Zialcita.
Given the hike in vacancies, Cushman & Wakefield expects rents to remain largely flat or modestly increase in core markets next year.
As such, landlords will have the upper hand in markets with single-digit vacancies and above-average rent growth, said Zialcita.
Meanwhile, Sydney, Melbourne, Tokyo, Bengaluru, Pune, Hyderabad, Chennai and Bangkok are expected to witness the highest rent growth next year, she added.
Rents in Sydney and Melbourne are set to rise by 10 to 11 percent and eight to nine percent, respectively, in 2017.
Rents in Tokyo, on the other hand, will continue to edge up to their eight-year highs in 2017 but the new supply coming on in 2018 could hold back the rent gains seen over the last five years.
India’s leading technology hubs, Bengaluru, Pune and Hyderabad are set to witness the highest rent growth among emerging markets next year – at 17 percent, 10 percent and six percent, respectively, due to strong take-up in the IT/Information Technology-enabled Services (ITeS) sector, added the report.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg.