OFFICE LEASING IN THE REGION OFF TO A STRONG

OFFICE LEASING IN THE REGION OFF TO A STRONG START
Demand in core markets up by 20%; driven by insurance sector
Hong Kong, May 14 2015 – Despite near 20 million sf of space being completed in the region
in the first quarter of 2015, vacancy rates remained well under control, increasing by just 0.4
percentage points to 9.9%. In the core markets, demand for space increased by over 20% –
the insurance sector was the stand-out performer here, accounting for over 40% of the major
leases inked, with the bulk of the leases signed evident of a flight-to-quality trend.
In Singapore, the completion of CapitaGreen has seen a number of blue-chip tenants moving to
the prime grade development while Ace Insurance relocated from a space in the suburbs to take
up a 40,000 sf space in Seoul’s Gangnam business district.
“There is an increased propensity of the new Grade A buildings to lease at a faster velocity than
lower-grade projects,” said Sigrid Zialcita, Managing Director of Research for Asia Pacific,
Cushman & Wakefield. “New buildings in gateway cities such as Tokyo, Beijing, Shanghai, Seoul
and even Singapore are reporting very high pre-leasing rates,” she added.
In Tokyo for example, Japan Post Insurance is consolidating its employees in Osaki Bright Tower,
inking close to a million sf lease that will see the yet-to-be completed building fully precommitted. While tenants are moving to these higher-grade facilities because of very competitive
rates and efficient workspaces, organic growth is also an important decision catalyst.
With the Southeast Asia region on the brink of economic integration, insurers are generally
upbeat on this burgeoning region’s prospects. For instance, life insurer Manulife paid $1.6 billion
to local bank DBS for a 15-year exclusive deal to sell its insurance products to the bank’s client
base while Berkshire Hathaway-linked Specialty Insurance has obtained a license to operate in
Singapore.
“Looking at the employment data for the major cities, we’ve seen the office-using sector
continuing to expand. In particular, we’re seeing this in higher take-up levels in the financial
sector, which has sat on the sidelines over the past quarters. The technology sector also remains
very active across the region, with the likes of Apple and Facebook, benefiting from continuing
phenomenal financial performance”, said Miss Zialcita.
Sectoral Leasing
Activity in APAC (Q1 2015)
Transport/Logistic
s
2%
Professional Svcs
3%
BPO
7%
Others
9%
Insurance
24%
Manufacturing
15%
[CATEGORY
NAME]*
[PERCENTAGE]
Banking/Finance
[PERCENTAGE]
Banks/Non-banks
9%
TAMI: Technology, Advertising, Media, Internet
*major leases only
Source: Cushman & Wakefield
This is especially evident in Australia, as the country adjusts to the shifting economic structure,
post the mining boom, where demand for office space were the strongest in the non-mining
states. Vacancies fell in Sydney, driven by demand across a wide range of companies in the
financial, technology and business and professional services sectors. In Melbourne, tenants taking
advantage of the softer market are driving absorption in the CBD as they move back into the
central business districts.
Overall rents in the region remained on an upward trend from the last quarter of 2014. From a
rental standpoint, stronger occupancies are supporting rental gains in financial hubs. In Tokyo,
good projects are enjoying a rent premium. Hong Kong is also another example, where rents
have started to edge up in Central after languishing for an extended period of time, driven by
demand from Mainland brokerages who are backfilling spaces that are being vacated by firms
relocating to lower cost submarkets.
For the emerging markets, Bengaluru continued to enjoyed strong demand from the technology
sectors. During the quarter, Oracle inked a 400,000 sf space in the JP Nagar submarket. However,
the strong construction environment in Jakarta and other Tier-2 markets in China and India is
certainly supporting higher availabilities in those markets and a modest correction in rates.
“Still, we have had a good start to the year and we are maintaining a positive outlook for the
region. Generally, we expect macroeconomic conditions to be generally supportive of the
occupier and investment markets”, said Miss Zialcita.
Net Absorption (Q1 2015)
Emerging
8.5
Core
6.8
NB: in msf
Source: Cushman & Wakefield
Net Absorption (sf)
Type
Core
Emerging
City
Adelaide
Beijing
Brisbane
Hong Kong
Melbourne
Perth
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Ahmedabad
Bangkok
Bengaluru
Chengdu
Chennai
Guangzhou
Hanoi
Ho Chi Minh City
Hyderabad
Jakarta
Kolkata
Manila
Mumbai
NCR
Pune
Shenzhen
Q1 2014
190,995
1,297,262
-160,608
320,883
197,496
-229,228
1,389,201
-804,032
64,574
94,593
68,121
1,569,175
504,500
32,873
550,406
894,201
90,853
202,928
-41,010
59,707
1,746,566
210,002
114,000
434,334
667,775
1,324,053
443,556
439,410
Q1 2015
-52,528
2,533,132
-55,552
218,513
244,459
12,174
-142,568
2,031,380
-124,147
514,751
217,322
1,427,127
151,800
-4,523
3,301,513
103,624
494,844
98,619
160,828
-23,616
620,968
198,836
287,600
422,246
1,058,950
597,047
634,200
363,421
Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company
advises and represents clients on all aspects of property occupancy and investment, and has established a
preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the
most significant property leases, sales and management assignments. Founded in 1917, it has approximately
250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services
for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate
finance and investment banking, corporate services, property management, facilities management, project
management, consulting and appraisal. The firm has nearly $4 billion in assets under management globally.
A recognized leader in local and global real estate research, the firm publishes its market information and
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