Asean cities see decline in office rentals

Asean cities see decline in office rentals

Workers try to set up a stage at Sathorn Square, one of busy business district in Bangkok. (Bangkok Post file photo)
Workers try to set up a stage at Sathorn Square, one of busy business district in Bangkok. (Bangkok Post file photo)

Office rentals in most Southeast Asian cities declined in last year's fourth quarter, in line with the economic slowdown across Asean, says property consultancy JLL.

Real growth in Singapore, Malaysia, Indonesia, Thailand, the Philippines and Vietnam moderated from 5.8% in 2012 to 4.1% last year and is likely to remain between 4.5% and 5.3% over the next five years.

JLL predicts weakness in commodity markets and the oil and gas sector will continue to hurt the Kuala Lumpur and Jakarta office markets. In these cities, rents declined more severely than in the third quarter, although this helped to maintain their competitiveness in Asia-Pacific.

Jakarta is the 13th most expensive city in Southeast Asia, while Kuala Lumpur is highly competitive in the lower fifth percentile, according to the JLL Asia-Pacific Office index.

In Singapore, rental decline was slower at 1.4% quarter-on-quarter as demand picked up, supporting rental growth in other regional cities.

Singapore ranks fifth after Hong Kong, Beijing, Shanghai and Tokyo. JLL does not, however, expect a recovery in Singapore's office segment any time soon.

High supply this year and next, a weak economy and the likelihood of low employment growth are likely to force landlords to make aggressive cuts.

A short-term lack of good-grade office space in Bangkok has sent rents rising by 2.6% quarter-on-quarter -- the highest in Southeast Asia in the quarter. However, the larger supply of good grade suburban offices in the coming years could add downward pressure on rents over the next 12 months.

In line with expectations, growth in the offshoring and outsourcing sector together with new completions lifted rents by 0.9% in Manila.

Despite the increase, overall rents in Makati's central business district, located in Manila, remain highly competitive compared with other cities in Asia-Pacific.

Capital values in Southeast Asian office markets largely kept pace with rental movement. Bangkok was the exception, where yield was driven down by high land prices coupled with strong buying interest but limited assets for sale.

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