Foreign companies lured by growth in Asean office market
Companies are shifting their focus from the mainland to the rising Southeast Asian market
International occupiers have shifted their focus from the mainland to the Asean office markets, lured by better economic growth and lower costs, according to property consultant DTZ.
On the other hand, demand growth for office space slowed in the mainland amid concerns over slower economic growth, the property consultant said.
"This is impacting the China markets, and cautionary sentiment saw Shanghai drop out of our top five biggest risers in terms of rental growth in 2013, while Beijing has made way for Jakarta at the top of the ranking," DTZ said in the report.
According to the consultants, the rental growth of Jakarta office space was about 13 per cent in 2013, against 10 per cent growth in Beijing.
"As we move into 2013, it is clear that the dynamic growth witnessed in many Chinese markets over the last two years has begun to taper off, with weak rental growth across most locations in the first quarter," DTZ said in the report.
"Whilst this was partly due to the traditional seasonal slowdown as a result of the Chinese New Year festivities, it also reflects ongoing concerns as to whether the Chinese economy can recover its strength," the company added.
Its view was echoed by another property consultant CBRE, which said in a report that Shanghai continued to see weak demand - particularly from multinationals - and net absorption during the period was just 40 per cent of the historical average.
DTZ said Beijing's CBD still tops its quarterly rental growth ranking, as tight supply maintains a landlord's market. DTZ forecasts average rental growth of 8.5 per cent per annum over the next five years.
"But at only 2.4 per cent quarter-on-quarter and 9.3 per cent year-on-year, this is spectacularly well below the 30 per cent average annual growth recorded over the last three years," it said.
Rental growth in Shanghai slowed in the first quarter, while rents in Guangzhou and Shenzhen have stabilised following the fluctuations of 2012.
In terms of completion, DTZ said the majority of the mainland markets reported no new office completions in the first quarter. However, a large development pipeline is looming and this is a cause for concern in some markets. The highest pipeline is in Shanghai, bringing more than 4 million sq m of new office space to the market between 2013 and 2015, representing 80 per cent of existing stock.
CBRE also said Shanghai has the highest development pipeline of any market with 31.1 million sq ft of new supply forecast to be completed between now and the end of 2015.