Asia Pacific Prime Office Markets See Further Weakness
Office markets rents across Asia-Pacific recovered slightly in Q2 2019, rising 0.9% quarter-on-quarter and reversing the 0.4% decline seen previously. On an annual basis, office rents were up 3.4% year-on-year during the period, decelerating from the 6.2% rise seen last quarter. The positive quarterly growth reading in Q2 2019, despite the generally soft economic climate, was driven mainly by Tokyo which recorded a 6.9% quarter-on-quarter rise due to the limited supply conditions within the market. However, looking at the wider region, things were not as rosy. Of the 20 cities tracked by the index, 14 recorded either stable or increased rents; one less than the 15 reported last quarter. As we cross into the second half of 2019, we maintain our muted growth expectations with rents expected to end the year flat, down from 2018’s 7.7% rise.
Hong Kong’s office rents contracted afurther 1.1% quarter-on-quarter, driven by uncertainty over the US-China trade tensions and softer economic conditions. Given the current situation with Hong Kong and expectations for significantly softer domestic economic conditions in Q3 2019; office rents should see a more pronounced decline for the rest of this year. On the mainland, a softer Chinese economy and an oversupply situation continues to weigh on rents with both Chinese recording 1.6% and 1.1% quarter-on-quarter declines.