Skyrocketing rents: Singapore sees steepest office rental growth in Asia for Q2

Rents spiked 4.6% amid vacancy crunch.

Office space is running out in the island. It’s a small wonder that Singapore topped the Asian office rental growth league in the second quarter of the year, as rents spiked by 4.6% for the period.

According to JLL's Office Index 2Q14, Singapore’s steep rental growth outpaced that of Hong Kong (1%), Beijing (2.5%) and Jakarta (-0.4%).

In Q2, average rental for Grade A office space was pegged at US$828 (S$1034) per square metre per annum. Office space in singapore is the third costliest in the region, after Hong Kong Central at US$1,493 ($1864) psm per year and the Beijing CBD at US$996 ($1243) psm per year.

The report also noted that most tenants in Hong Kong and Singapore preferred renewals over relocations, as expansion demand in the region remained generally subdued as large firms are still cutting costs.

Most leasing activity still related to small or domestic occupiers, but leasing activity in the region surged 20% in the quarter.

Here’s more from JLL:
During 2Q14, net effective rents grew in over half of all Tier I markets. The Asia Pacific Office Index increased by 0.9% quarter-on-quarter, slightly up on 0.8% in 1Q14 but still below the post-GFC average growth of 1.1%.

Singapore continued to see the strongest quarterly rental growth (4.6%), closely followed by Auckland (4.4%), while growth improved in Beijing (2.5% cf. largely flat in 1Q), as vacancy edged lower in all these locations.

Growth remained steady (2%) in Tokyo, while small rental increases were seen in Hong Kong, Shanghai and Manila (1 to 1.5%).

Rents in Jakarta fell for the first time since 3Q09 (–0.4% q-o-q) due partly to occupier caution and with business expansion put on hold before the election in July. In Australia, effective rents were largely steady in Sydney and Melbourne on healthy levels of enquiry/activity but fell in other cities by up to 9% q-o-q (mainly on higher incentives) due to limited demand.

Over the twelve months to end-2Q14, average rents in aggregate grew 1.8% compared with 1.1% in the twelve months ended 1Q14. Singapore (+15.9%) outpaced Jakarta to become the regional outperformer on an annual basis, following by Taipei, Bangkok and Jakarta (between 7.5 and 8.5%). At the opposite end of the spectrum, the Australian CBDs (down between 2 and 27% for the year except for Sydney) continue to see the weakest performance.