Prime Real Estate Prices to Trend Higher Across Asia with Eyes on China’s Market

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Going into the second half of 2014, office rental around Asia continues on the up and up, though analysts are cautious about the effect of the slowing Chinese economy on the rest of the region, according to a recent report.

On the back of rising economic sentiment and tightening supply, prime markets in Hong Kong, Singapore, Tokyo and Bangkok saw solid rental growth in both price and volume, according to the Q2 Asia Pacific Prime Office Rental Index by Knight Frank.

  • Leading the region was Phnom Penh, which recorded the greatest quarter-on-quarter rent growth of 18.6 percent.
  • Singapore entered into its 4th consecutive quarter of rental growth, due to strong leasing demand (with numerous large rental transactions) and a limited availability of office space in the central business district. The land-strapped island is expected to see a further 10 percent rental growth by the end of the year.

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  • In Bangkok, despite the largest addition of new office space in ten quarters, net absorption rate rose by 24.3 percent from last quarter and vacancy rates continued to fall.
  • In India, real estate sentiment is high following the election of Prime Minister Modi, with more than 75 percent of developers who believe that leasing volumes will surge by the end of the year, according to Knight Frank’s Q2 2014 Real Estate Sentiment Index.
  • The market in China’s leading cities, however, did not fare as well – A surge in new supply depressed rents in Shanghai, while the economic slowdown continued to affect Beijing’s market.

Overall, although 16 out of 20 markets across Asia are expected to see constant or increased rent in the remainder of the year, everything hinges on performance in the Chinese market, the highest risk factor in the region, Knight Frank analysts reported.

RELATED: Comparison- Prime ‘Grade A’ Office Rental Prices in China

Meanwhile, global investors have been putting their money into office spaces around Asia, according to a report from Cushman and Wakefield. In the second quarter of 2014, investors bought a recordUS$6.16 billion worth of office space in the region, more than doubling the amount they spent in the same quarter last year, the Wall Street Journal reports.

South Korea, Australia and China were especially popular investment destinations, with foreign investors accounting for almost 70 percent of purchases in South Korea in the second quarter. The surge in funding inflow comes as low interest rates in the U.S., Europe and Japan are pushing investors to seek higher returns elsewhere.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asia@dezshira.com or visit www.dezshira.com.

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