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Asian office market begins to stabilise but companies remain cost-cautious
The Asian office market showed signs of stabilising in the
second quarter of 2009, but companies remained focused on reducing costs and
tightening their real estate expenditures, according to CB Richard Ellis.
Pressure to further reduce office space requirements nevertheless began to ease
as the macro economic environment became somewhat calmer and, in the case of
China, began to recover and improve. Most Asian cities either recorded a smaller
negative net absorption or a mild increase in office requirements. Overall
vacancy for Asian cities rose 0.6% quarter-on-quarter 12.5% in the second
quarter, but the rate of increase slowed from 1.2% in the previous quarter.
In Bangkok, the total amount of occupied office space increased over the last
six months, but only by 22,131 square metres. Total office supply as of Q2 2009
was 7.86 million square metres with a vacancy rate of 14.0%, compared to 14.2%
at the end of Q1 2009. Grade A CBD rents decreased 5.7% year-on-year, standing
at THB 700 per square metre per month for 200 – 300 square metre transactions.
There is very little new office space under construction. The Energy Complex on
Vibhavadi-Rangsit Road, comprising 119,000 square metres, will be completed in
Q4 2009, but this has been fully let to PTT and affiliated companies.
In 2010, only Sathorn Square, Golden Land’s grade A development next to the
Chong Nonsi BTS station will be completed with 73,500 square metres and Sivatel
with 5,880 square metres on Wireless Road. In 2011 the only new office building
in Bangkok will be Park Ventures with 28,000 square metres on the corner of
Wireless and Ploenchit Roads.
“With such a limited amount of new supply, any increase in the amount of
occupied space created by a recovering economy will lead to an increase in
rents,” said Nithipat Tongpun, Executive Director and head of Office Services at
CB Richard Ellis Thailand.
Retaining existing tenants and attracting new ones remained the top priority for
office landlords in Asia. In many markets, office landlords displayed a definite
willingness to negotiate lease restructuring and offer more incentives to
desirable corporate occupiers. However, leasing markets were sluggish overall
and office rents remained caught in the down cycle.
According to the CB Richard Ellis Asia Office Rental Index, overall office rents
in Asia fell 6.7% in the second quarter, decelerating slightly from the 8.1%
decline witnessed in the previous quarter as most cities underwent a milder rate
of rental reduction.
Occupier activity in Tokyo was slower than expected in the second quarter. The
majority of transactions concluded comprised either renewals in which existing
occupiers achieved reduced rental costs in exchange for committing to longer
lease terms, or corporate flight to quality in which companies opted for better
locations without assuming higher rental costs.
Although economic conditions in South Korea improved during the review period,
demand for quality office space in Seoul continued to shrink. The average
vacancy rate for grade A offices climbed to 3.1% in the second quarter from 2.2%
in the first quarter.
The Chinese government’s implementation of its four trillion Yuan stimulus
package continued to help bolster business confidence in China during the second
quarter. In Beijing, prime office demand from overseas companies began to rise
and a number of major leasing transactions involving foreign companies were
completed. However, in Guangzhou it was domestic occupiers, particularly
state-owned enterprises with monopolistic positions in certain industrial
sectors, who comprised the main source of demand for prime office space. Both
cities enjoyed a significant increase in net absorption over the second quarter.
Elsewhere, Shanghai edged towards positive absorption as overall sentiment
improved, although the city continued to record negative net absorption during
the review period.
In Taipei, the commercial property investment market performed well in
anticipation of closer economic ties with Mainland China, prompting landlords to
raise their rental expectations during the second quarter. However, office
occupiers seemed disconnected from the optimism displayed by landlords as they
struggled to make ends meet under the present tough economic environment.
Overall demand for office space in Hong Kong remained weak during the second
quarter, directly reflecting the fact that the city is home to a sizeable
concentration of MNCs and international financial institutions that have been
directly impacted by the current crisis. The Central CBD, which accommodates
many overseas banks’ Asian headquarters, witnessed an extremely sharp quarterly
decline in rentals, and rents remained generally soft across all office
sub-markets.
Singapore is also home to the Asian headquarters of a large number of MNCs and
consequently saw the further weakening of prime office demand during the
quarter. Prime rents have now fallen 46.6% from the peak recorded in Q3 2008 and
occupancy rates will continue to face pressure from substantial new supply.
Singapore has some 770,000 square metres of new office space in the development
pipeline between now and 2013 and it seems certain that for the short term at
least, supply will continue to outstrip demand.
In India, the election of a new government and falling interest rates improved
local business sentiment during the second quarter. Although there were some
small signs of improvement, Mumbai, Delhi and Bangalore witnessed office rents
slide further as buildings in the CBD saw an exodus of occupiers as corporates
moved to alternative locations in order to reduce real estate costs. Although
the rise in demand for less costly premises bolstered office sub-markets outside
the CBD, landlords of buildings in secondary office destinations struggled with
the consequences of speculative overbuilding and were forced to increase
incentives to recruit tenants.
Jakarta was the only city in Asia where rentals held firm, while Kuala Lumpur
saw only a mild rental correction within the period under review. In Ho Chi Minh
City, the low rent strategy adopted by the newly completed Centec Tower, the
first grade A building to come on stream in a decade, drove average grade A
rents down by 28.8% from the previous quarter.
CB Richard Ellis anticipates that the Asia office occupier market is witnessing
demand beginning to stabilise and business confidence turn slightly more
positive as clearer signs of economic recovery emerge. However, the recovery
Asian economies are currently experiencing is unlikely to translate into the
kind of brisk corporate expansion witnessed during the 2005 and 2007 period.
Rather, it is anticipated that corporate occupiers will continue to adopt a
conservative approach towards real estate decisions, especially those that would
lead to an increase in operating costs.
With respect to companies in Asia with operations which do not need to be
situated in prestigious locations, many remain receptive to relocating these
elements to lower cost premises, sometimes even opting for less mature business
precincts in exchange for substantial savings. (Source CB Richard Ellis
Thailand)
Raimon Land offers exclusive
promotions at Northpoint, Pattaya
Property developer Raimon Land has launched two unprecedented payment options at
its exclusive Northpoint project in Pattaya to assist buyers in achieving their
dream of owning a luxury beachfront condominium.
 The
completed Tower A & B structures at Northpoint Pattaya.
An innovative Preferred Payment Programme provides Northpoint buyers with a
two-year period to make full payment of their condominium after it has been
completed and they have moved in.
The Credit Card Scheme offers buyers using Visa or MasterCard the option to pay
the THB100,000 booking fee and the 10% contract fee if they so wish, with Raimon
Land absorbing the bank fees.
Raimon Land Chief Executive Officer, Hubert Viriot, said the company understands
property buyers are currently facing challenges in securing lines of credit.
“However, we also realise that demand remains strong for the high-quality real
estate developments that Raimon Land offers, and this prompted us to offer these
very generous payment avenues at Northpoint to help make people’s dreams come
true,” he said.
Through July 2009, Raimon Land has sold 72% of the 376 residential units in the
award-winning Northpoint development. Located on North Pattaya’s prestigious
Wong-Amat Beach, the project will be ready to move-in early 2010.
Recognised as the “Best Condo Development Eastern Seaboard” at the Thailand
Property Awards 2008, Northpoint redefines beachfront living in Pattaya with a
mix of one, two and three bedroom luxury units, as well as three to four-bedroom
duplexes and penthouses, ranging in size from 53-492sqm, with tropical modern
designs, and every unit enjoying uninterrupted views of the Gulf of Thailand.
Located on 80-metres of beachfront amid tiered horizon pools and specially zoned
sun decks, Northpoint also features spectacular Sky Gardens, state-of-the-art
fitness facilities, a kids’ playground and lush greenery.
For more information, visit www.northpointpattaya.com
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