08 March 2012

Thriving Office Sale Prices in Asia Pacific Amid Expectation Of Credit Easing

According to Colliers International’s Asia Pacific Office Market Overview 4Q 2011, office rents in individual cities experienced a slowdown but sale prices took an upbeat trend in the region last quarter.

Amid the lingering sovereign debt problems, which resulted in a continued damper on key economies around the world, more occupiers were seen to adopt a more cautious outlook in their business sentiment. Overall, the average office rent saw a marginal growth of a mere 0.3% quarter-on-quarter (QoQ) during 4Q 2011. As the Federal Open Market Committee (FOMC) in the United States downgraded the country’s projected economic growth for 2012, sentiments in the cities reliant on external trade rang negative due to increased expectations of slowing exports to the West.

Not all is lost however, as several cities in Asia with strong internal consumption saw positive growth in office leasing. In Greater China, fundamentals remain strong with sustained leasing requirements from a number of industries including financial services, manufacturing and information & technology, while domestic enterprises continued to look for quality developments for consolidations, relocation and upgrades. Another performer in the region is Jakarta which registered an exceptional growth of 10% QoQ in office rents in 4Q 2011.

On the buy and sell side, office prices were more buoyant in 4Q 2011 despite the softening in rental price which resulted in either flat or slightly compressed investment yields in the region.

According to Mark Lampard, Managing Director of Corporate Solutions, Asia Pacific at Colliers International, investment funds generally maintained their appetite for quality investment opportunities in order to take advantage of the existing low interest rate environment. Based on the office investment sales transactions in 4Q 2011, the key buying force were domestic investors and cash-rich end users buying high merit investments for self-use or rental income.

“In terms of outlook, the expectation is that the office demand will continue to soften for the first half of 2012. However, office capital values are expected to remain its uptrend in anticipation of a new round of quantitative easing and more upcoming investment funds in the pipeline with more deals to be concluded by a broader range of buyers ,” added Lampard.

“In the Philippines, particularly in Metro Manila, the leasing market remains upbeat as space requirements from BPO (Business Process Outsourcing) firms continues to expand,” said Paul Vincent Chua, Associate Director and Head of Consulting and Research in the Philippines. According to the Business Processing Association of the Philippines (BPAP), the industry’s full-time employees reached to about 640,000 last year (22% higher than in 2010) which could have absorbed over two million square meters of office space. “In effect, lease rates are expected to increase by 5%-8% across most Grade A buildings in the next twelve months. This upward trend is seen to sustain ahead as the number of employees on the same sector builds up to over a million in 2016,” said Chua.

Thailand