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Most markets in the region will see an improvement in office rents on the back of stronger occupancies in 2017, according to Cushman & Wakefield’s Mid-Year Outlook Report 2016. Across the 30 major cities tracked by Cushman through 2017, 14 may even post record rents.
Cushman expects falling vacancies through 2017 to favour landlords in Tokyo, Sydney and Melbourne, where strong demand will keep Grade A vacancies hovering close to their equilibrium of 7%. Meanwhile, rents could begin to stabilise in core markets, including Singapore, Brisbane and Perth.
Singapore is expected to post the highest vacancy increase of eight to nine percentage points among core markets between 2015 and 2017. Since 1Q2015, rents for Grade A properties in the CBD have slipped more than 15% and will likely decline another 7% to 10% y-o-y in 2016 before stabilising in 2017.
The city state will witness a record supply of four million sq ft of office space to be delivered by next year. Leasing activity is also moderating as international banks continue to shrink their footprints. A slowing economy and low unemployment rate are also holding back activity.
However, office investment in Singapore saw a resurgence in 2Q2016 with landmark transactions this year. For instance, the sale of Asia Square Tower 1 to the Qatar Investment Authority for US$2.5 billion ($3.35 billion) set a new record in Asia-Pacific for the largest single-asset transaction in the last five years.