_Knight Frank Asia-Pacific Prime Office Rental Index – Q1 2021
The Knight Frank Asia-Pacific Prime Office Rental Index fell 1.2% quarter-on-quarter in Q1 2021. This was contributed in large by declines in some of the major cities of the region, such as Tokyo, Hong Kong and Bengaluru, all recording negative rental declines of between 2.8% to 3.0%. The decline is expected to decelerate as economic conditions continue to improve in many markets and the rental incentives doled out over the past year is gradually reined in. Meanwhile workers continue to return to offices as COVID-19 situations stabilise. With these green shoots in sight, we forecast rents to decline no more than 3.0% in 2021, compared to the 4.8% in 2020.
Singapore
A quarter-on-quarter fall in Singapore’s prime rents by 1.0% in Q1 2021 represents a significant deceleration from the 2.0% decline recorded in the previous quarter. The government’s plans to swiftly vaccinate its adult population and reopen the economy later in the year have boosted sentiments. Sub-leasing activities are also showing signs for slowing during the quarter, which bodes well for the office market outlook over the following quarters. We expect rents to bottom out over the rest of the year, as the market looks to return to normal with COVID-19 largely contained and vaccines are swiftly deployed.
Hong Kong
As mentioned before, Hong Kong was one of the major decliners in Asia-Pacific in Q1 2021, dropping 2.7% quarter-on-quarter. Currently, the low rentals are incentivising higher levels of leasing activities for some companies to actively look into expansion. Landlords are facing pressures from prolonged elevated vacancy levels and will likely further adjust rents downwards to attract good covenant tenants. The revival in activity levels in the office leasing market will decelerate the rate of price declines in the market and begin to stabilise over the next few quarters.
Sydney
Prime headline and net effective rents remained stable for the Sydney market during Q1 2021. An improvement in deal flows in 2021 has helped give the market the boost it needed to recover from its challenging conditions. While there is some pent-up demand waiting to be released, many tenants are still adopting a wait-and-see approach to ride out some of the uncertainty borne from COVID-related disruptions, until vaccines are fully rolled out. As such, we expect headline rents to remain stable in the coming quarter, with incentives gradually petering out as stronger recovery begin to occur in 2022 and beyond.
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To read the full Asia-Pacific Prime Office Rental Index – Q1 2021 report, click here.
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