Cushman & Wakefield Research

Asia Pacific Marketbriefs - November 2011

Dec 02, 2011

ASIA PACIFIC MARKETBRIEFS AN OVERVIEW OF THE ASIA PACIFIC OFFICE MARKET A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION NOVEMBER 2011 ASIA PACIFIC MARKETBRIEFS REGIONAL APAC The growth momentum in Asia Pacific slowed in the third quarter as a result of Vacancy continued uncertainty. Several countries + 0.8% lowered their GDP growth forecasts Rent and most central banks in the region + 1.6% have in place tightening cycles on hold. Nevertheless, office fundamentals remained strong except for supply heavy markets. The regional office vacancy rates increased slightly to 11.4%. Grade A rents also reached a record high for Beijing and Hong Kong. Investment activity is still holding up despite market volatility and there is a noticeable increased interest in logistics and hotels. We expect a continued slowdown as we enter 2012 but the Asia Pacific region is well positioned to weather a challenging global economy. Y-o-Y change 12-mth outlook CHINA BEIJING Strong demand fueled by leasing and Grade A records have posted a record high of RMB454/sq.m./month (mo), higher than that of Shanghai's rent at Rent RMB412/sq.m./mo. Consequently, + 24.0% Grade A vacancy rate has fallen to a low of 2.7%. The current shortage in supply has given landlords a bargaining chip in negotiations and rentals are expected to be on an uptrend. To combat the increasing costs, tenants are seen to be considering options in adjacent suburban locations. Y-o-Y change 12-mth outlook Vacancy - 1.8% CHENGDU Y-o-Y change SELECT COUNTRIES AUSTRALIA ADELAIDE Y-o-Y change Vacancy continued to fall marginally from 8.3% to 8.1% with limited supply Vacancy totaling below 30,000 square metres - 0.2% (sq.m.) over the last year. Leasing Rent activity has been stable with strong + 2.2% demand for Grade A space. Incoming supply over the next two years amount to less than 40,000 sq.m. Rents are forecasted to be in the range of A$460/sq.m./year to A$500/sq.m./year. 12-mth outlook The completion of few projections in this quarter resulted in an increase in vacancy to 31.8% and a marginal decrease in rentals. The large number of projects in Rent the pipeline is expected to create a glut - 0.8% in the next few years. Currently, leasing activity is still stable but it would likely be a tenant-favorable market. Landlords may face more competition and there would be a downward pressure on rents. 12-mth outlook Vacancy + 5.7% GUANGZHOU Y-o-Y change MELBOURNE Y-o-Y change Leasing activity in Melbourne has been active. There is an average absorption Vacancy of 55,000 sq.m. for the past six + 0.4% months, well above the average 62,500 Rent sq.m. Sales transaction volume has 0.0% also increased and offshore investors contributed 62% of the total amount. Though there will be an additional 112,000 sq.m. scheduled for completion next year, it is expected that the space would be taken up quickly. 12-mth outlook Driven by increasing demand from foreign and domestics companies, the Vacancy leasing market was characterised by - 2.4% high activity, causing the average rents Rent of Grade A offices to increase slightly. + 3.5% The average net effective rent of Grade A offices grew to 3.5% quarter-on-quarter (q-o-q). Market rents in the main submarkets saw modest growth. The average net effective rent of Grade A offices in Tianhe submarket rose by 3.4% q-o-q. At the same time, the PRNC submarket remained the first choice for high-end tenants, causing the average net effective rent of Grade A offices to rise by 1.6%. 12-mth outlook SHANGHAI Y-o-Y change SYDNEY Y-o-Y change Overall vacancy increased from 8.1% to 8.9% due to the influx of supply. With Vacancy uncertainty in the global environment, - 0.8% occupiers are cautious and would only Rent upgrade their premises if necessary. 0.0% Foreign investors were observed to be contributing to 52% of sales transactions compared to 7% by REITs and public-listed companies. The ratio was vastly different from 2010 where foreign investors only made up 16% while REITs contributed 54%. 12-mth outlook Strong demand coupled with limited supply continued to push up rentals Vacancy and average net effective rents reached - 1.8% RMB412/sq.m./mo. Buoyed by strong Rent leasing, vacancy levels went down to + 5.4% about 7.0%. Most high quality buildings are fully occupied. Although there will be about 300,000 sq.m. of space by end of the year, the lack of high quality CBD space would fuel rents to appreciate another 5% and thereby achieve a 15% to 20% year-on year increase in 2011. 12-mth outlook SHENZHEN Y-o-Y change 12-mth outlook Vacancy - 1.0% Rent + 5.6% Driven by strong leasing activity, the CBD rents in Shenzhen have risen to an average of RMB301/sq.m./mo this quarter. Coupled with no new supply for the past three quarters, overall vacancy continued to decline to about 9.7%. 1 Note: (1) All vacancy and rent changes are q-o-q basis (2) Rent changes are based on local currency ASIA PACIFIC MARKETBRIEFS Office leasing is expected to remain active as evident from the number of pre-leasing activities. With optimistic expectations, some projects have also started pre-leasing its space. The market is expected to see the completion of both Ruisi and Yinlong International Centers in the fourth quarter, adding a total of 450,000 sq.m of space. HONG KONG Y-o-Y change CHENNAI Y-o-Y change The overall net effective rent reached HK$72.5 per square feet per month (/sf/ Vacancy mo) up 3.4% q-o-q. Strong rental growth - 0.7% is observed for Kowloon, supported by Rent demand from relocations and expansions. + 3.4% Demand is sustained albeit at a moderated space, causing availability to contract from 4.6% to 3.9%. In the light of current economic conditions and continued uncertainty, the Grade A office market would probably experience a cooling off period over the next twelve months. Going into 2012, rents may remain flat and the real estate sector performance would be tightly linked to the economic conditions of the global environment and/or the financial sector. 12-mth outlook The Chennai market saw new supply of about 895,000 sf in this quarter. Despite the slowdown in the economy, demand remained relatively strong and increased Rent absorption helped to reduce the overall 0.0% vacancy further to 16.8% from 17.9% in the last quarter. Rentals however remained stable. 12-mth outlook Vacancy - 1.1% HYDERABAD Y-o-Y change INDONESIA JAKARTA Y-o-Y change Special Economic Zone (SEZ) developments continued to be the highlight Vacancy in Hyderabad with most occupiers wanting + 1.0% to avail the fiscal benefits in accordance Rent to the 2012 milestone. The market also - 2.0% witnessed higher leasing activities from the pharmaceutical and manufacturing companies on top of the traditional IT/ITes sector. An infusion of several projects this quarter led to an increase in the overall vacancy level to 14%. Hence, there was also downward pressure on rentals in a few micro markets. Though demand for SEZ is likely to continue, planned supply of close to 1.2 million sf is likely to lead to higher vacancy and a downward trend in rentals in the short term. 12-mth outlook Leasing enquiries and activities remained active, mostly on expansion requirements of not more than 300 sq.m. In this quarter, several buildings in the CBD experienced Rent major take-up of above 5,000 sq.m. but + 2.0% average rental rates of office space stayed stable at about Rp154,100/sq.m./mo. In this quarter, 68,100 sq.m. was added to total stock and inventory would reach 4.27 million sq.m. by end of 2011. It is forecasted that there would be some correction to the overall occupancy rate due to the scheduled construction completions. Rentals however will remain relatively stable. 12-mth outlook Vacancy - 0.0% KOLKATA Y-o-Y change Leasing activity this quarter has been active with pre-commitments dominated by Vacancy the telecoms sector. IT and BFSI sectors - 0.2% were the other two demand drivers. Due Rent to significant levels of vacancy, rents at + 4.3% the peripheral locations remained under pressure. It is expected that there would be no major changes to the rentals and vacancies in the next few quarters. 12-mth outlook INDIA AHMEDABAD Y-o-Y change MUMBAI Y-o-Y change Due to the slowdown in the economy, Ahmedabad experienced a decline in Vacancy demand and absorption was lower + 1.1% as compared to the previous quarter. Rent Consequently, vacancy levels rose 0.0% marginally from 8% to 9% this quarter. Generally, rentals remained stable. Many are adopting a cautious outlook and expansion plans are thus put on hold. Rentals are expected to stay flat across all micro markets. 12-mth outlook This quarter saw a scale down in leasing activities attributable to the uncertainties in Vacancy the global economy and the altered growth - 2.0% rate of the Indian economy. Occupiers Rent are more cautious and have reconsidered - 6.2% their expansion plans and pricing options. Demand is still mainly driven by the banking and financial sector followed by the IT/ITes sector. In the short term, we expect demand to be restrained and the large supply scheduled for completion in the next quarter would likely put pressure on rentals. 12-mth outlook BANGALORE Y-o-Y change NCR Buoyant demand continued in Bangalore this quarter. Supply however Vacancy increased compared to last quarter with + 1.0% approximately 1.4 million sf added into Rent the market. Overall vacancy rates declined 0.0% marginally to about 12.3%. Rentals reached a plateau across all micro markets. Nevertheless, due to the volatility in the global environment, demand is likely to be subdued. Rentals and vacancies are forecasted to be stable through the end of the year on account of the current higher asking prices and the developers' flexibility in negotiations. 12-mth outlook There was noticeable interest among occupiers for the upcoming SEZ Vacancy developments which led to pre+ 1.1% commitments of nearly 350,000 sf during Rent this quarter. The IT/ITes sector continued 0.0% to be the biggest demand driver, accounting for more than 50% of the transactions exceeding 100,000 sf. On the outlook, we expect rental values to remain stable across most submarkets. Y-o-Y change 12-mth outlook 2 ASIA PACIFIC MARKETBRIEFS PUNE Leasing and construction activities in Pune were slow during the third quarter. Vacancy The economic turmoil in the West which - 2.0% restricted access to credit were some Rent of the reasons for the slowdown in the 0.0% commercial real estate developments resulting in a reduction of demand by nearly 15% over the previous quarter. The absorption was mainly concentrated in the suburban and peripheral locations owing to affordable rentals and better infrastructure facilities. This has led to a marginal appreciation in rentals in these micro markets unlike the others where it remained stable. Y-o-Y change 12-mth outlook Going forward, we expect rents to be stable TAIWAN TAIPEI Y-o-Y change SOUTH KOREA SEOUL Y-o-Y change Leasing activity and interest remains positive in Taipei with Xinyi Planned Area as the Vacancy preferred choice for financial institutions - 0.2% and international corporations. With Rent no new supply added for the past three + 0.4% quarters, average Grade A rents continued to inch upwards. On investment activity, this quarter saw higher commercial transactions with the total value in September alone amounting to US$1.52 billion. The buildings transacted include B&Q, Cathay Dunnan and Shin Kong buildings. 12-mth outlook Though leasing activity remained at healthy levels, there was still more supply Vacancy added than absorbed and Grade A vacancy + 4.8% levels rose to 13.6%. This quarter saw the Rent completion of four new major buildings. - 1.8% Also, due to additions of supply in the coming quarters, overall vacancy level in the CBD is expected to be on the uptrend. Seoul will continue to be a tenant's market. 12-mth outlook JAPAN TOKYO With declining rents in Tokyo's office market, space was actively taken up. Overall, Vacancy the market trends observed in the second + 0.2% quarter continues where occupiers clearly Rent preferring buildings with better anti- 0.9% earthquake functions. Nevertheless, longer term, a decreasing working-age population will impact demand. Y-o-Y change 12-mth outlook MALAYSIA KUALA LUMPUR Y-o-Y change Overall, the Grade A office leasing market performed fairly stable with a slight Vacancy increase in rentals for premier buildings in - 1.8% Kuala Lumpur. Generally, new buildings Rent located at strategic locations equipped + 5.5% with the Green mark status, has secured tenants as occupiers who are willing to pay a reasonable premium for such space. Nevertheless, due to the huge incoming supply over the next two years (i.e. about 6.3 msf), it is expected that there would be a downward pressure on rentals. 12-mth outlook THAILAND BANGKOK Y-o-Y change The on-going flood crisis in Bangkok is expected to weigh down on the economy Vacancy and wreck any economic stimulation plans + 0.1% that the new Government originally had. Rent In the third quarter, overall office market 0.0% in Bangkok remained stable. The market witnessed the completion of several buildings adding 111,500 sq.m. The supply would further increase when four other buildings enter the market in 2012 to 2013. 12-mth outlook PHILIPPINES MANILA Y-o-Y change VIETNAM HANOI Y-o-Y change The real estate market in the Philippines continued to perform, mainly due to Vacancy the demand from the Business Process - 0.2% Outsourcing/Call Center industry. With Rent slow completions and limited supply, + 2.2% landlords continued to increase rentals in key cities such as Fort Bonifacio and Ortigas Center. The market is expected to remain positive for the remainder of the year. 12-mth outlook Hanoi is currently characterised as a tenant's market. There would be more than 10 msf Vacancy (1.0 million sq.m.) of office space scheduled + 0.5% for completion over the next three years; Rent twice as much as the current supply. Thus, + 0.3% vacancy rates are likely to trend upwards. For occupiers, it would be a good opportunity for relocations to the West of Hanoi where facilities are new and rental rates are lower. 12-mth outlook SINGAPORE HO CHI MINH CITY Y-o-Y change 12-mth outlook Growth has been sustained in the Grade Y-o-Y change 12-mth outlook A office leasing market albeit with a Vacancy slight moderation this quarter due to the + 1.7% uncertainty in the global environment. Rent Consequently, vacancy rate rose to 5.5%. + 2.2% Grade A rentals in Raffles Place averaged around S$10.70 /sf/mo reflecting a 2.9% increase q-o-q. Despite economic uncertainties, rentals have been fairly resilient as Singapore is still ranked as one of the easiest place and entrance for businesses. Leasing activity increased in the third quarter despite the current unfavorable Vacancy economic climate. The increased availability - 3.0% of space in the market resulted in stiffer Rent competition among landlords offering - 5.0% various incentives such as extended rent-free periods. Overall occupancy rates and rentals would be under pressure in the short to medium term. 3 ASIA PACIFIC MARKETBRIEFS 3Q 2011 SIGNIFICANT NEW LEASE TRANSACTIONS Country/City Building Submarket CBD CBD Rajarhat Noida Quezon City SK E&C Cognizant Sapient HP Tenant Daelim Industrial Co. Ltd Square Feet 537,442 533,750 270,000 200,000 193,750 South Korea/Seoul Twin Tree Tower South Korea/Seoul Mirae Asset Tower India/Kolkata India/NCR Philippines/Manila Unitech SEZ Oxygen SEZ Tower C Eton Two Cyberpod Centris Source: Cushman & Wakefield Research Table: 1 3Q 2011 SIGNIFICANT NEW SALE TRANSACTIONS Country/City Japan/Tokyo Japan/Tokyo Taiwan/Taipei Taiwan/Taipei Malaysia/Kuala Lumpur Building Mitsubishi Heavy Industry HQ Roppongi Hills Gate Tower Shin Kong Dunnan Building Cathay Dunnan Building Putra Place Submarket Minato Minato Dun S. Dun S. KL City Buyer/Seller Nippon Building Fund Mori Building Cathay Life Insurance Cathay Life Insurance Sunway Real Estate Investment Trust Square Feet 613,320 178,887 327,941 355,088 300,000 Purchase Price (US$ million) 786 464 316 282 162 Source: Cushman & Wakefield Research Table: 2 3Q 2011 SIGNIFICANT CONSTRUCTION COMPLETIONS Country/City China/Guangzhou South Korea/Seoul Thailand/Bangkok India/Bangalore India/NCR Building Taikoo Hui Signature Tower Sathorn Square World Technology Centre DLF Cyber Terraces (Building No 5 Tower C) Submarket Tianhe District CBD CBD-Sathorn ORR(Sarjapur-Hebbal) Gurgaon Major Tenant HSBC Bank Burson-Marstellar Korea Co. Ltd Cannon Ericsson NA Square Feet 1,313,196 1,076,304 791,147 750,468 730,000 Completion Date 3Q11 3Q11 3Q11 3Q11 3Q11 Source: Cushman & Wakefield Research Table: 3 3Q 2011 SIGNIFICANT PROJECTS UNDER CONSTRUCTION Country/City China/Guangzhou China/Shenzhen China/Shenzhen China/Guangzhou China/Guangzhou Building Pear River Tower Kingkey Financial Center 100 Shenzhen Stock Exchange Center The Pinnacle Lea Top Plaza Submarket PRNC Luohu CBD PRNC PRNC Major Tenant NA NA NA NA NA Square Feet 2,302,474 2,206,600 1,937,502 1,722,235 1,716,842 Completion Date 4Q11 4Q11 4Q11 2Q12 4Q11 Source: Cushman & Wakefield Research Table: 4 4 ASIA PACIFIC MARKETBRIEFS 3Q 2011 RENTAL RATES LOCAL CURRENCY COUNTRY CITY MEASUREMENT GRADE A OCCUPANCY COST 68.75 54.17 50.83 63.33 39.17 496.10 455.81 172.40 235.64 316.60 82.04 85 65 46 120 300 257 60 36 193,813 26,000 29,023 6.53 569 9.35 3,562 712 822,785 780,124 QoQ CHANGE IN RENTS (%) 0.0 0.0 0.0 1.3 2.2 24.0 5.4 -0.8 3.5 5.6 3.4 0.0 0.0 -2.0 4.3 -6.2 0.0 0.0 0.0 2.0 0.0 -1.8 5.5 2.2 2.2 0.4 0.0 -5.0 0.3 YoY CHANGE IN RENTS (%) -1.2 12.1 1.7 4.1 4.4 72.6 23.1 11.6 31.7 6.3 8.3 -2.1 22.4 0.0 3.6 3.4 9.1 5.0 -3.7 6.0 4.5 1.9 21.4 0.1 -0.5 -20.0 5.8 USD* GRADE A OCCUPANCY COST 6.58 5.18 4.86 6.06 3.75 7.22 6.63 2.51 3.43 4.61 10.53 1.71 1.31 0.92 2.41 6.03 5.16 1.21 0.72 2.01 9.58 2.52 2.06 1.21 7.17 3.29 2.15 3.29 3.47 EURO# GRADE A OCCUPANCY COST 49.71 39.17 36.76 45.79 28.32 56.89 52.27 19.77 27.02 36.30 82.95 13.61 10.41 7.36 19.21 48.03 41.15 9.61 5.76 16.00 76.19 18.05 16.42 9.61 57.48 26.23 17.09 29.19 26.97 Australia Australia Australia Australia Australia China China China China China China India India India India India India India India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam Vietnam Sydney Melbourne Brisbane Perth Adelaide Beijing Shanghai Chengdu Guangzhou Shenzhen Hong Kong Bangalore Chennai Hyderabad Kolkata Mumbai NCR Pune Ahmedabad Jakarta Tokyo Seoul Kuala Lumpur Manila Singapore Taipei Bangkok Ho Chi Minh City Hanoi AUD/sqm/mth AUD/sqm/mth AUD/sqm/mth AUD/sqm/mth AUD/sqm/mth RMB/sqm/mth RMB/sqm/mth RMB/sqm/mth RMB/sqm/mth RMB/sqm/mth HKD/sqft/mth INR/sqft/mth INR/sqft/mth INR/sqft/mth INR/sqft/mth INR/sqft/mth INR/sqft/mth INR/sqft/mth INR/sqft/mth IDR/sqm/mth JPY/tsubo/mth KRW/sqm/mth RM/sqft/mth PHP/sqm/mth SGD/sqft/mth TWD/ping/mth THB/sqm/mth VND/sqm/mth VND/sqm/mth * In psf per month # In psm per month Source: Cushman & Wakefield Research Table: 5 5 ASIA PACIFIC MARKETBRIEFS 3Q 2011 VACANCY RATES 35.0 30.0 (Percentage) 25.0 20.0 15.0 10.0 5.0 Beijing Hong Kong Singapore Manila Melbourne Shanghai Adelaide Tokyo Shenzhen Sydney Ahmedabad Brisbane Perth Jakarta Bangkok Bangalore Taipei Seoul Hyderabad Hanoi Kuala Lumpur NCR Chennai Ho Chi Minh Guangzhou Mumbai Pune Kolkata Chengdu Source: Cushman & Wakefield Research Figure: 1 PROJECTS UNDER CONSTRUCTION IN ASIA PACIFIC Philippines 3% South Korea Singapore 6% 1% Malaysia 5% Taiwan 1% Thailand 1% Vietnam 9% Australia 3% China 33% Japan 4% Indonesia 1% India 32% Hong Kong 1% Source: Cushman & Wakefield Research Figure: 2 6 ASIA PACIFIC MARKETBRIEFS Cushman & Wakefield's Asia Pacific Research Group utilises research data material, statistics and sources to create leading micro and macro economic market reports and publications about the Asia Pacific region. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world and business issues of the day, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. For all research related queries, please contact Sigrid Zialcita Managing Director, Research, Asia Pacific Email: Address: 3 Church Street #09-03 Samsung Hub Singapore 049483 65 6535 3232 Joanne Lee Manager, Research, Asia Pacific Email: Address: 3 Church Street #09-03 Samsung Hub Singapore 049483 65 6535 3232 AUSTRALIA David Woolford Managing Director Email: Address: Level 1, 60 Castlereagh Street Sydney, Australia NSW 2000 612 9223 4888 CHINA Andy Zhang Managing Director Email: Address: 6F, Tower 1, China Central Place No. 81 Jianguolu, Chaoyang District Beijing, China 100025 86 10 5921 0808 HONG KONG John Siu Executive Director Email: Address: 9th Floor St George's Building, 2 Ice House Street, Central, Hong Kong 852 2956 3888 INDIA Anurag Mathur Managing Director Email: Address: 14th Floor, Tower C, Building 8 DLF Cyber City Gurgaon, India Haryana-122002 91 124 4695555 INDONESIA David Cheadle Managing Director Email: Address: Jakarta Stock Exchange Building Tower 2, 15th Floor Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 62 21 2550 9500 JAPAN Todd Olson Executive Managing Director Email: Address: Sanno Park Tower 13F 2-11-1 Nagatacho Chiyoda-ku, Tokyo, Japan 100-6113 813 3596-7070 MALAYSIA YY Lau CEO Email: Address: Lot 3A-1, Level 4, Wisma W1M 7 Jalan Abang Haji Openg Taman Tun Dr Ismail Kuala Lumpur, Malaysia 60000 603 7728 8116 PHILIPPINES Jose Marie Cuervo CEO Email: Address: 5th F S&L Building 101 Esteban St. cor. Dela Rosa St. Legaspi Village, Makati City 1229, Philippines 632 750 6610 SINGAPORE Toby Dodd Executive Director Email: Address: 3 Church Street #09-03 Samsung Hub, Singapore 049483 65 6535 3232 SOUTH KOREA Richard Hwang Managing Director Email: Address: 5/F Korea computer building 21 Sogong-dong, Jung-gu Seoul, South Korea 100-070 822 3188 322 TAIWAN Michael Tseng President Email: Address: REPro International Inc. 13F-2, No. 89, SongRen Road Exchange Square One Taipei, Taiwan 886 2 2758 6000 THAILAND Teerawit Limthongsakul Director Email: Address: 31st FI., Bangkok Insurance Building / Y.W.C.A. 25 South Sathorn Road, Thungmahamek, Sathorn Bangkok 10120, Thailand 02 286 8899 VIETNAM Hang Dang Managing Director Email: Address: Level 3, Pathfinder Building 52 Dong Du, District 1 Ho Chi Minh City,Vietnam 84 8 2914 707 7 2011 Cushman & Wakefield All Rights Reserved


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