SINGAPORE (EDGEPROP) - Singapore and Melbourne show the strongest rent growth potential over the next five years among developed office markets, highlights Colliers International in its report on rent growth prospects in Asia Pacific.
Among emerging office markets, rent growth potential appears to be the highest in Bangalore. Boasting the highest medium-term GDP growth prospects in Asia, Colliers forecasts that the city will drive strong demand for office space from occupiers, which will translate into 3.2% average rent growth over the next five years.
In Singapore, Colliers expects city-wide rent to fall by 5.0% in 2020, but forecasts rents to pick up from 2021, driving a five-year average growth of 3.3% due to limited supply.
Although Melbourne faces near-term pressure on net take-up and rents, Colliers forecasts tenant demand in the big Australian cities to improve once the country’s borders have reopened. It expects rents in Melbourne to achieve 2.9% five-year average growth, as the Australian city is a global centre for biomedical research.
In Auckland, present vacancy is at a record low of 4.7%, and rents have risen by 3.9% per annum over the past five years. Colliers attributes this to strong demand for office space, office conversion to residential and hotel space, and limited new developments that have weighed on demand and supply balance in the CBD for almost a decade. However, in the short term, it expects new office supply and the impact of Covid-19 to see market conditions ease in the city.
However, over the remainder of 2020, Colliers forecasts that only Taipei, Tokyo and Auckland can expect office rents to stay firm. The office markets in the three cities are currently supported by low vacancy rates, and in Tokyo’s case, high pre-commitment rates for new buildings.
Other office markets are likely to see through a tough year, it says. In Hong Kong, average office rents are expected to fall by 14% in 2020.
Meanwhile, Chinese tier-1 cities face a “significant threat” to near-term rent growth. Shanghai and Shenzhen, in particular, face an overhang of new supply, which should push the city-wide vacancy rates to 25% and 29% respectively. In Shanghai, Colliers predicts a 6.1% drop in average rent over 2020, with smaller declines in other cities.
Elsewhere, Manila faces the steepest near-term downturn in rents; Colliers forecasts a 17% decline over 2020.
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